Forward and Falsely Induced Reverse Information Cascades
Journal of Behavioral Finance, Forthcoming
34 Pages Posted: 22 Jun 2011
Date Written: June 20, 2011
This study is the first to empirically test both forward and (falsely induced) reverse information cascades in an experimental setting using real-time instant feedback to participants. We find that, on average, individuals abandon their private information sets in favor of the group’s as early as three steps and as late as five steps into the information discovery process. Those scoring high on the Bearden, Netemeyer, and Teel (1989) Susceptibility to Normative Influence (SNI) scale are significantly more likely to experience the reverse cascade. Mavens and social connectors are hypothesized to be in the greatest position to increase the rapidity of such cascades in an actual market setting.
Keywords: Information Cascade, Forward Cascade, Falsely Induced Reverse Cascade, Mavens, Social Connectors
JEL Classification: R30, Z00
Suggested Citation: Suggested Citation