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Do Individuals Recognize Cascade Behavior of Others? --An Experimental Study--

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  • Andreas Stiehler

Abstract

In a cascade experiment subjects are confronted with artificial predecessors predicting in line with the BHW model (Bikhchandani, Hirshleifer and Welch, 1992). Using the BDM mechanism we study subjects' probability assignments based on price limits for participating in the prediction game. We find increasing price limits the more coinciding predictions of predecessors are observed and regardless of whether additional information is actually revealed by predecessors' predictions. Individual price patterns of more than two thirds of the participants indicate that cascade behavior of predecessors is not recognized.

Suggested Citation

  • Andreas Stiehler, "undated". "Do Individuals Recognize Cascade Behavior of Others? --An Experimental Study--," Papers on Strategic Interaction 2003-02, Max Planck Institute of Economics, Strategic Interaction Group.
    • Handle: RePEc:esi:discus:2003-02
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    File URL: ftp://papers.econ.mpg.de/esi/discussionpapers/2003-02.pdf
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    Citations

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    Cited by:

    1. Ron W. NIELSEN, 2016. "Mathematical Analysis of Historical Income Per Capita Distributions," Turkish Economic Review, KSP Journals, vol. 3(2), pages 300-319, June.
    2. Ron W. NIELSEN, 2016. "The Unresolved Mystery of the Great Divergence is Solved," Journal of Economic and Social Thought, KSP Journals, vol. 3(2), pages 196-219, June.
    3. Ron W. NIELSEN, 2016. "Scientifically Unacceptable Established Knowledge in Demography and in Economic Research," Journal of Economics Library, KSP Journals, vol. 3(3), pages 429-457, September.

    More about this item

    Keywords

    information cascades; Bayes' rule; decisions under risk and uncertainty; experimental economics;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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