Are Longer Cascades More Stable?

Abstract

Yes, they are. We consider data from experimental cascade games that were run in different laboratories, and find uniformly that subjects are more willing to follow the crowd, the bigger the crowd is - although the decision makers who are added to the crowd should in theory simply follow suit and hence reveal no information. This correlation of length and strength of cascades appears consistently across games with different parameters and different choice sets for the subjects. It is also observed in games where it runs counter to the theoretical prediction, so behavior moves away from equilibrium play over the stages of the games.

Keywords: Herding, social learning, experimental economics

JEL Classification: C72, C92, D82