Informational cascades in the laboratory: Do they occur for the right reasons?
Recently, the theory of informational cascades has been tested in an experiment by Anderson and Holt (1997) who report that their data support the theory amazingly well. In this note we report on an experiment designed to find out whether observed cascades are indeed due to rational Bayesian updating. However, we find little support for rational updating. The simple heuristic "follow your own signal" does much better in explaining our data than Bayesian rationality.
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- Reinhard Selten & Klaus Abbink & Joachim Buchta & Abdolkarim Sadrieh, 2000.
"How to Play 3x3-Games A Strategy Method Experiment,"
Bonn Econ Discussion Papers
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- 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.
- Selten, R. & Abbink, K. & Buchta, J. & Sadrieh, A., 2002. "How to Play 3x3 Games : A Strategy Method Experiment," Discussion Paper 2002-39, Tilburg University, Center for Economic Research.
- Friedman, Daniel, 1998. "Monty Hall's Three Doors: Construction and Deconstruction of a Choice Anomaly," American Economic Review, American Economic Association, vol. 88(4), pages 933-46, September.
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- 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.
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