Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
957298 | Journal of Economic Theory | 2011 | 19 Pages |
Abstract
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.
Keywords
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
H. Henry Cao, Bing Han, David Hirshleifer,