A Simple Note on Informational Cascades

Annamaria Fiore () and Andrea Morone

No 2007-21, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Seminal models of herd behaviour and informational cascades point out existence of negative information externalities, and propose to ?destroy? information in order to achieve social improvements. Although in the last years many features of herd behaviour and informational cascades have been studied, this particular aspect has never been extensively analysed. In this article we try to fill this gap, investigating both theoretically and experimentally whether and to which extent destroying information can improve welfare. Our empirical results show that this decisional mechanism actually leads to a behaviour more consistent with the theory that in turn produces the predicted efficiency gain.

Keywords: Informational cascades; information externality; individual decision making; experiment (search for similar items in EconPapers)
JEL-codes: C91 D62 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:5568

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