(Presentation Slides) Taking the Road Less Traveled by: Does Conversation Eradicate Pernicious Cascades?

38 Pages Posted: 21 Aug 2018

See all articles by H. Henry Cao

H. Henry Cao

University of North Carolina (UNC) at Chapel Hill - Finance Area

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Date Written: March 24, 2009

Abstract

We offer a model in which sequences of individuals often converge upon poor decisions and are prone to fads, despite communication of the payoff outcomes from past choices. This reflects both direct and indirect action-based information externalities. In contrast with previous cascades literature, cascades here are spontaneously dislodged and in general have a probability less than one of lasting forever. Furthermore, the ability of individuals to communicate can reduce average decision accuracy and welfare.
Latest version of the paper is "Taking the Road Less Traveled by: Does Conversation Eradicate Pernicious Cascades?," Cao, H. Henry, Han, Bing and Hirshleifer, David A., available here: https://ssrn.com/abstract=422180.

Keywords: information cascades, herding, conversation, imitation, information externality

JEL Classification: D82, D83, G31, D23, K00

Suggested Citation

Cao, Huining Henry and Hirshleifer, David A., (Presentation Slides) Taking the Road Less Traveled by: Does Conversation Eradicate Pernicious Cascades? (March 24, 2009). Available at SSRN: https://ssrn.com/abstract=3217349 or http://dx.doi.org/10.2139/ssrn.3217349

Huining Henry Cao

University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

David A. Hirshleifer (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
13
Abstract Views
186
PlumX Metrics