(Presentation Slides) Taking the Road Less Traveled by: Does Conversation Eradicate Pernicious Cascades?
38 Pages Posted: 21 Aug 2018
Date Written: March 24, 2009
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: Suggested Citation