Interacting Information Cascades: On the Movement of Conventions between Groups

Posted: 21 Aug 2016 Last revised: 2 Oct 2017

See all articles by James Fisher

James Fisher

USAA

John Wooders

New York University Abu Dhabi; University Technology Sydney

Date Written: August 17, 2016

Abstract

When a decision maker is a member of multiple social groups, her actions may cause information to to spill over from one group to another. We study the nature of these spillovers in an observational learning game where two groups interact via a common player, and where conventions emerge when players follow the decisions of the members of their own groups rather than their own private information. We show that: (i) if a convention develops in one group but not the other group, then the convention spills over via the common player; (ii) when conventions disagree, then the common player's decision breaks the convention in one group; and (iii) when no convention has developed, then the common player's decision triggers the same convention in both groups. We also show that information spillovers may reduce welfare and we investigate the surplus-maximizing timing of spillovers.

JEL Classification: C72, D83

Suggested Citation

Fisher, James and Wooders, John C., Interacting Information Cascades: On the Movement of Conventions between Groups (August 17, 2016). Available at SSRN: https://ssrn.com/abstract=2825528 or http://dx.doi.org/10.2139/ssrn.2825528

James Fisher (Contact Author)

USAA ( email )

Fredericksburg Road
San Antonio, TX

John C. Wooders

New York University Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates
+971 126285802 (Phone)

HOME PAGE: http://johnwooders.com

University Technology Sydney ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

HOME PAGE: http://johnwooders.com/

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