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Signal accuracy and informational cascades

Author

Listed:
  • Tuvana Pastine
  • Ivan Pastine

Abstract

We extend the Bikhchandani, Hirshleifer and Welch (1992) informational cascade framework to allow for asymmetric signal accuracy. Simulations demonstrate that even small departures from symmetry may lead to non-monotonic effects of signal accuracy on the likelihood of an inefficient cascade.

Suggested Citation

  • Tuvana Pastine & Ivan Pastine, 2006. "Signal accuracy and informational cascades," Working Papers 200620, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200620
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    File URL: http://hdl.handle.net/10197/698
    File Function: First version, 2006
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    References listed on IDEAS

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    1. 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.
    2. Welch, Ivo, 1992. "Sequential Sales, Learning, and Cascades," Journal of Finance, American Finance Association, vol. 47(2), pages 695-732, June.
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    6. 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.
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    8. Pastine, Tuvana, 2005. "Social Learning in Continuous Time: When are Informational Cascades More Likely to be Inefficient?," CEPR Discussion Papers 5120, Centre for Economic Policy Research.
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    Cited by:

    1. Wu, Jiemai, 2015. "Helpful laymen in informational cascades," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 407-415.
    2. Fiore, Annamaria & Morone, Andrea, 2008. "A Simple Note on Informational Cascades," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 2, pages 1-21.

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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