IDEAS home Printed from https://ideas.repec.org/a/aea/jecper/v10y1996i4p187-93.html
   My bibliography  Save this article

Classroom Games: Information Cascades

Author

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

Abstract

This paper describes how to set up a classroom exercise in which students see private signals and make public decisions in sequence. A pattern of conforming decisions in this context is called an information cascade. Once a cascade starts, it is rational for students to ignore their private signals and follow the pattern of previous decisions. This exercise provides an interactive framework that facilitates discussions of Bayes's rule, information, and social conformity.

Suggested Citation

  • Lisa R. Anderson & Charles A. Holt, 1996. "Classroom Games: Information Cascades," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 187-193, Fall.
    • Handle: RePEc:aea:jecper:v:10:y:1996:i:4:p:187-93
    Note: DOI: 10.1257/jep.10.4.187
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.10.4.187
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. McKelvey, Richard D. & Ordeshook, Peter C., 1985. "Elections with limited information: A fulfilled expectations model using contemporaneous poll and endorsement data as information sources," Journal of Economic Theory, Elsevier, vol. 36(1), pages 55-85, June.
    2. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    3. Welch, Ivo, 1992. "Sequential Sales, Learning, and Cascades," Journal of Finance, American Finance Association, vol. 47(2), pages 695-732, June.
    4. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baddeley, M. & Burke, C. & Schultz, W. & Tobler, P., 2012. "Herding in Financial Behaviour: A Behavioural and Neuroeconomic Analysis of Individual Differences," Cambridge Working Papers in Economics 1225, Faculty of Economics, University of Cambridge.
    2. Baddeley, Michelle & Parkinson, Sophia, 2012. "Group decision-making: An economic analysis of social influence and individual difference in experimental juries," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(5), pages 558-573.
    3. Bekius, Femke & Meijer, Sebastiaan & de Bruijn, Hans, 2018. "Collaboration patterns in the Dutch railway sector: Using game concepts to compare different outcomes in a unique development case," Research in Transportation Economics, Elsevier, vol. 69(C), pages 360-368.
    4. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
    5. Bogaçhan Çelen & Shachar Kariv, 2004. "Distinguishing Informational Cascades from Herd Behavior in the Laboratory," American Economic Review, American Economic Association, vol. 94(3), pages 484-498, June.
    6. Buda, Rodolphe, 2009. "Learning-Testing Process in Classroom: An Empirical Simulation Model," MPRA Paper 12146, University Library of Munich, Germany.
    7. Femke Bekius & Sebastiaan Meijer & Hugo Thomassen, 2022. "A Real Case Application of Game Theoretical Concepts in a Complex Decision-Making Process: Case Study ERTMS," Group Decision and Negotiation, Springer, vol. 31(1), pages 153-185, February.
    8. Tong, Chao & He, Wenbo & Niu, Jianwei & Xie, Zhongyu, 2016. "A novel information cascade model in online social networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 444(C), pages 297-310.
    9. Michelle Baddeley, 2020. "Hoarding in the age of COVID-19," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 4(S), pages 69-75, June.
    10. Charles A. Holt, 2011. "Teaching Experimental Economics: Reinforcing Paradigms and Bringing Research into the Undergraduate Classroom," Chapters, in: Gail M. Hoyt & KimMarie McGoldrick (ed.), International Handbook on Teaching and Learning Economics, chapter 47, Edward Elgar Publishing.
    11. Jonathan Guest, 2015. "Reflections on ten years of using economics games and experiments in teaching," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1115619-111, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Corazzini, Luca & Greiner, Ben, 2007. "Herding, social preferences and (non-)conformity," Economics Letters, Elsevier, vol. 97(1), pages 74-80, October.
    2. Drehmann, Mathias & Oechssler, Jorg & Roider, Andreas, 2007. "Herding with and without payoff externalities -- an internet experiment," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 391-415, April.
    3. Brian Knight & Nathan Schiff, 2010. "Momentum and Social Learning in Presidential Primaries," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1110-1150.
    4. Una Okonkwo Osili & Anna L. Paulson, 2008. "Bank crises and investor confidence," Working Paper Series WP-08-17, Federal Reserve Bank of Chicago.
    5. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany.
    6. repec:awi:wpaper:0420 is not listed on IDEAS
    7. Trenca Ioan & Petria Nicolae & Dezsi Eva, 2013. "An Inquiry Into Contagion Transmission And Spillover Effects In Stock Markets," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 472-482, December.
    8. Welch, Ivo, 2000. "Herding among security analysts," Journal of Financial Economics, Elsevier, vol. 58(3), pages 369-396, December.
    9. Devenow, Andrea & Welch, Ivo, 1996. "Rational herding in financial economics," European Economic Review, Elsevier, vol. 40(3-5), pages 603-615, April.
    10. Chang, Eric C. & Cheng, Joseph W. & Khorana, Ajay, 2000. "An examination of herd behavior in equity markets: An international perspective," Journal of Banking & Finance, Elsevier, vol. 24(10), pages 1651-1679, October.
    11. Cao, Melanie & Shi, Shouyong, 2006. "Signaling in the Internet craze of initial public offerings," Journal of Corporate Finance, Elsevier, vol. 12(4), pages 818-833, September.
    12. Fishman, Arthur & Fishman, Ram & Gneezy, Uri, 2019. "A tale of two food stands: Observational learning in the field," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 101-108.
    13. Eddie Dekel & Michele Piccione, 2000. "Sequential Voting Procedures in Symmetric Binary Elections," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 34-55, February.
    14. Wang, Peiwen & Chen, Minghua & Wu, Ji & Yan, Yuanyun, 2023. "Do peer effects matter in bank risk? Some cross-country evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    15. Mathias Drehmann & Jörg Oechssler & Andreas Roider, 2005. "Herding and Contrarian Behavior in Financial Markets: An Internet Experiment," American Economic Review, American Economic Association, vol. 95(5), pages 1403-1426, December.
    16. A. Corcos & J-P Eckmann & A. Malaspinas & Y. Malevergne & D. Sornette, 2002. "Imitation and contrarian behaviour: hyperbolic bubbles, crashes and chaos," Quantitative Finance, Taylor & Francis Journals, vol. 2(4), pages 264-281.
    17. Silvio Vismara, 2018. "Information Cascades among Investors in Equity Crowdfunding," Entrepreneurship Theory and Practice, , vol. 42(3), pages 467-497, May.
    18. Saad, Mohsen & Samet, Anis, 2020. "Collectivism and commonality in liquidity," Journal of Business Research, Elsevier, vol. 116(C), pages 137-162.
    19. Denter, Philipp & Sisak, Dana, 2015. "Do polls create momentum in political competition?," Journal of Public Economics, Elsevier, vol. 130(C), pages 1-14.
    20. Feri, Francesco & Meléndez-Jiménez, Miguel A. & Ponti, Giovanni & Vega-Redondo, Fernando, 2011. "Error cascades in observational learning: An experiment on the Chinos game," Games and Economic Behavior, Elsevier, vol. 73(1), pages 136-146, September.
    21. Puput Tri Komalasari & Marwan Asri & Bernardinus M. Purwanto & Bowo Setiyono, 2022. "Herding behaviour in the capital market: What do we know and what is next?," Management Review Quarterly, Springer, vol. 72(3), pages 745-787, September.

    More about this item

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:10:y:1996:i:4:p:187-93. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.