Information Aggregation with Random Ordering: Cascades and Overconfidence

24 Pages Posted: 8 Mar 2003

See all articles by Markus Noeth

Markus Noeth

University of Hamburg

Martin Weber

University of Mannheim - Department of Banking and Finance

Abstract

In economic models, it is usually assumed that agents aggregate their private information with all available public information correctly and completely. In this experiment, we identify subjects' updating procedures and analyse the consequences for the aggregation process. Decisions can be based on private information with known quality and on the observed decisions of other participants. In this setting with random ordering, information cascades are observable and agents' overconfidence has a positive effect on avoiding a non-revealing aggregation process. However, overconfidence reduces welfare in general.

Suggested Citation

Noeth, Markus and Weber, Martin, Information Aggregation with Random Ordering: Cascades and Overconfidence. Available at SSRN: https://ssrn.com/abstract=377047

Markus Noeth (Contact Author)

University of Hamburg ( email )

Chair of Banking and Behavioral Finance
WiSo
Hamburg, 20146
Germany
+49-40-42838 3337 (Phone)
+49-40-42838 5512 (Fax)

Martin Weber

University of Mannheim - Department of Banking and Finance ( email )

D-68131 Mannheim
Germany
+49 621 181 1532 (Phone)
+49 621 181 1534 (Fax)

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