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Informational cascades in the laboratory: Do they occur for the right reasons?

Author

Listed:
  • Steffen Huck

    (Humboldt University, Berlin)

  • Joerg Oechssler

    (Humboldt University, Berlin)

Abstract

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.

Suggested Citation

  • Steffen Huck & Joerg Oechssler, 1999. "Informational cascades in the laboratory: Do they occur for the right reasons?," Experimental 9901001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpex:9901001
    Note: pages: 9
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    References listed on IDEAS

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    More about this item

    Keywords

    herding; information cascades; experiments.;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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