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Tie-breaking Rules and Informational Cascades: A Note

  • Frédéric KOESSLER
  • Anthony ZIEGELMEYER

In Bikhchandani, Hirshleifer, and Welch\'s (1992) specific model, it is showed that conformist behaviors can emerge due to information externalities. In this note we establish that this result, based on `informational cascades\', heavily depends on the choice of a particular tie-breaking convention. Relaxing this assumption allows for other equilibria to exist, in which informational cascades are not necessarily observed. Our findings also have implications for the analysis of experimental data on informational cascades. In this respect, we argue that further experiments should be based on other experimental designs.

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Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2000-09.

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Date of creation: 2000
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Handle: RePEc:ulp:sbbeta:2000-09
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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 847-62, December.
  2. 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.
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