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Information Cascades in the Laboratory*

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Author

Listed:
  • Anderson, Lisa R
  • Holt, Charles A

Abstract

When a series of individuals with private information announce public predictions, initial conformity can create an 'information cascade' in which later predictions match the early announcements. This paper reports an experiment in which private signals are draws from an unobserved urn. Subjects make predictions in sequence and are paid if they correctly guess which of two urns was used for the draws. If initial decisions coincide, then it is rational for subsequent decisionmakers to follow the established pattern, regardless of their private information. Rational cascades formed in most periods in which such an imbalance occurred. Copyright 1997 by American Economic Association.

Suggested Citation

  • Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-862, December.
    • Handle: RePEc:aea:aecrev:v:87:y:1997:i:5:p:847-62
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    Replication

    This item has been replicated by:
  • Angela A. Hung & Charles R. Plott, 2001. "Information Cascades: Replication and an Extension to Majority Rule and Conformity-Rewarding Institutions," American Economic Review, American Economic Association, vol. 91(5), pages 1508-1520, December.

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    1. Information cascades in the laboratory (AER 1997) in ReplicationWiki

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