IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Information Cascades with Informative Ratings: An Experimental Test

Listed author(s):
  • Paul J. Healy

    ()

    (Department of Economics, Ohio State University)

  • John Conlon

    ()

    (Department of Economics, Ohio State University)

  • Yeochang Yoon

    ()

    (Department of Economics, Ohio State University)

We study behavior in an information cascades setting where previous buyers of the product leave noisy but informative ratings of the product. Although this increases the amount of public information available, Yoon (2015, working paper) shows that ratings can actually increase the frequency of cascades in which buyers do not purchase even though the product is of high quality. This occurs because non-buyers do not leave ratings. Although we find some evidence roughly in line with the theory, those results are swamped by a strong tendency for subjects to purchase even when public information suggests they should not.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.ohio-state.edu/pdf/healy/wp16-05.pdf
Download Restriction: no

Paper provided by Ohio State University, Department of Economics in its series Working Papers with number 16-05.

as
in new window

Length: 30 Pages
Date of creation: May 2016
Handle: RePEc:osu:osuewp:16-05
Contact details of provider: Postal:
410 Arps Hall 1945 North High Street Columbus, Ohio 43210-1172

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Markus Noth & Martin Weber, 2003. "Information Aggregation with Random Ordering: Cascades and Overconfidence," Economic Journal, Royal Economic Society, vol. 113(484), pages 166-189, January.
  2. Morone, Andrea & Fiore, Annamaria & Sandri, Serena, 2007. "On the absorbability of herd behaviour and informational cascades: an experimental analysis," Dresden Discussion Paper Series in Economics 15/07, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
  3. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
  4. Huck, Steffen & Oechssler, Jorg, 2000. "Informational cascades in the laboratory: Do they occur for the right reasons?," Journal of Economic Psychology, Elsevier, vol. 21(6), pages 661-671, December.
  5. Carrillo, Juan D. & Palfrey, Thomas R., 2011. "No trade," Games and Economic Behavior, Elsevier, vol. 71(1), pages 66-87, January.
  6. Drehmann, Mathias & Oechssler, Jorg & Roider, Andreas, 2007. "Herding with and without payoff externalities -- an internet experiment," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 391-415, April.
  7. Angela A. Hung & Charles R. Plott, 2001. "Information Cascades: Replication and an Extension to Majority Rule and Conformity-Rewarding Institutions," American Economic Review, American Economic Association, vol. 91(5), pages 1508-1520, December.
  8. Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001. "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica, Econometric Society, vol. 69(4), pages 831-859, July.
  9. Patt, Anthony & Zeckhauser, Richard, 2000. "Action Bias and Environmental Decisions," Journal of Risk and Uncertainty, Springer, vol. 21(1), pages 45-72, July.
  10. Matthews,R. C. O., 2011. "A Study in Trade-Cycle History," Cambridge Books, Cambridge University Press, number 9781107600119, December.
  11. Cipriani, Marco & Guarino, Antonio, 2008. "Transaction costs and informational cascades in financial markets," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 581-592, December.
  12. Bo\u{g}açhan Çelen & Shachar Kariv & Andrew Schotter, 2010. "An Experimental Test of Advice and Social Learning," Management Science, INFORMS, vol. 56(10), pages 1687-1701, October.
  13. Jason Shachat & Anand Srinivasan, 2011. "Informational Price Cascades and Non-aggregation of Asymmetric Information in Experimental Asset Markets," Working Papers 1102, Xiamen Unversity, The Wang Yanan Institute for Studies in Economics, Finance and Economics Experimental Laboratory, revised 14 Apr 2011.
  14. Corazzini, Luca & Greiner, Ben, 2007. "Herding, social preferences and (non-)conformity," Economics Letters, Elsevier, vol. 97(1), pages 74-80, October.
  15. 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.
  16. Jacob K. Goeree & Thomas R. Palfrey & Brian W. Rogers & Richard D. McKelvey, 2007. "Self-Correcting Information Cascades," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 733-762.
  17. Dorothea Kübler & Georg Weizsäcker, 2003. "Information Cascades in the Labor Market," Journal of Economics, Springer, vol. 80(3), pages 211-229, November.
  18. N/A, 2011. "World Trade Report 2011: Executive Summary," Foreign Trade Review, , vol. 46(2), pages 108-132, July.
  19. Bar-Eli, Michael & Azar, Ofer H. & Ritov, Ilana & Keidar-Levin, Yael & Schein, Galit, 2007. "Action bias among elite soccer goalkeepers: The case of penalty kicks," Journal of Economic Psychology, Elsevier, vol. 28(5), pages 606-621, October.
  20. Boğaçhan Çelen & Shachar Kariv, 2005. "An experimental test of observational learning under imperfect information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 677-699, October.
  21. Kraemer, Carlo & Noth, Markus & Weber, Martin, 2006. "Information aggregation with costly information and random ordering: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 59(3), pages 423-432, March.
  22. Goeree, Jacob K. & Holt, Charles A., 2004. "A model of noisy introspection," Games and Economic Behavior, Elsevier, vol. 46(2), pages 365-382, February.
  23. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  24. Dorothea Kübler & Georg Weizsäcker, 2004. "Limited Depth of Reasoning and Failure of Cascade Formation in the Laboratory," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 425-441.
  25. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-862, December.
  26. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
  27. Dominitz, Jeff & Hung, Angela A., 2009. "Empirical models of discrete choice and belief updating in observational learning experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 69(2), pages 94-109, February.
  28. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:osu:osuewp:16-05. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John Slaughter)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.