A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades

Bikhchandani, Sushil; Welch, Ivo; Hirshleifer, David

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A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades

Journal of Political Economy, Vol. 100, No. 5, pp. 992-1026, October 1992

51 Pages Posted: 1 Dec 2008 Last revised: 18 May 2009

See all articles by Sushil Bikhchandani

Sushil Bikhchandani

University of California, Los Angeles - Anderson School of Management

Ivo Welch

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

David Hirshleifer

University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER)

Date Written: March 1992

Abstract

An informational cascade occurs when it is optimal for an individual, having observed the actions of those ahead of him, to follow the behavior of the preceding individual without regard to his own information. We argue that localized conformity of behavior and the fragility of mass behaviors can be explained by informational cascades.

Suggested Citation: Suggested Citation

Bikhchandani, Sushil and Welch, Ivo and Hirshleifer, David, A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades (March 1992). Journal of Political Economy, Vol. 100, No. 5, pp. 992-1026, October 1992, Available at SSRN: https://ssrn.com/abstract=1286306