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Informational cascades: A mirage?

  • Spiwoks, Markus
  • Bizer, Kilian
  • Hein, Oliver
Registered author(s):

    Experimental research found contradictory results regarding the occurrence of informational cascades. Whereas Anderson and Holt [Anderson, L.R., Holt, C.A., 1997. Information cascades in the laboratory. The American Economic Review 87, 847-862] confirmed the model of Banerjee [Banerjee, A.V., 1992. A simple model of herd behavior. The Quarterly Journal of Economics 107, 797-817], and Bikhchandani et al. [Bikhchandani, S., Hishleifer, D., Welch, I., 1992. A theory of fads, fashion, custom, and cultural change as informational cascades. Journal of Political Economy 100, 992-1026] through lab tests, Huck and Oechssler [Huck, S., Oechssler, J., 2000. Informational cascades in the laboratory: do they occur for the right reasons? Journal of Economic Psychology 21, 661-671] came to contradictory results on crucial issues. This article presents experimental evidence supporting further doubts concerning "Bayesian" informational cascades: just under two thirds of all decisions are characterized by an excessive orientation towards the private signal, and only a small number of the subjects (

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167-2681(07)00142-4
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    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 67 (2008)
    Issue (Month): 1 (July)
    Pages: 193-199

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    Handle: RePEc:eee:jeborg:v:67:y:2008:i:1:p:193-199
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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    1. Daniel Sgroi, 2000. "The Right Choice at the Right Time: A Herding Experiment in Endogenous Time," Economics Series Working Papers 2000-W15, University of Oxford, Department of Economics.
    2. Steffen Huck & Joerg Oechssler, 1999. "Informational cascades in the laboratory: Do they occur for the right reasons?," Experimental 9901001, EconWPA.
    3. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
    4. Selten, Reinhard & Abbink, Klaus & Buchta, Joachim & Sadrieh, Abdolkarim, 2003. "How to play (3 x 3)-games.: A strategy method experiment," Games and Economic Behavior, Elsevier, vol. 45(1), pages 19-37, October.
    5. Bogaçhan Çelen & Shachar Kariv, 2004. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory," American Economic Review, American Economic Association, vol. 94(3), pages 484-498, June.
    6. Charles A. Holt & Jacob K. Goeree, 1999. "Stochastic Game Theory: For Playing Games, Not Just for Doing Theory," Virginia Economics Online Papers 306, University of Virginia, Department of Economics.
    7. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
    8. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-62, December.
    9. Jacob K. Goeree & Charles A. Holt, 2000. "A Model of Noisy Introspection," Virginia Economics Online Papers 343, University of Virginia, Department of Economics.
    10. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 2004. "Through Trial and Error to Collusion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 205-224, 02.
    11. Plott, Charles & Hung, Angela, 1998. "Information Cascades: Replication and an Extension to Majority Rule and Conformity Rewarding Institutions," Working Papers 1051, California Institute of Technology, Division of the Humanities and Social Sciences.
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