Self-Correcting Information Cascades

Jacob Goeree, Thomas Palfrey, Brian Rogers and Richard D. McKelvey

Review of Economic Studies, 2007, vol. 74, issue 3, 733-762

Abstract: We report experimental results from long sequences of decisions in environments that are theoretically prone to severe information cascades. Observed behaviour is much different—information cascades are ephemeral. We study the implications of a theoretical model based on quantal response equilibrium, in which the observed cascade formation/collapse/formation cycles arise as equilibrium phenomena. Consecutive cascades may reverse states, and usually such a reversal is self-correcting: the cascade switches to the correct state. These implications are supported by the data. We extend the model to allow for base rate neglect and find strong evidence for overweighting of private information. The estimated belief trajectories indicate fast and efficient learning dynamics. Copyright 2007, Wiley-Blackwell.

Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (91) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1111/j.1467-937X.2007.00438.x (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Self-Correcting Information Cascades (2006)
Working Paper: Self-Correcting Information Cascades (2004)
Working Paper: Self-correcting Information Cascades (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:74:y:2007:i:3:p:733-762

Access Statistics for this article

Review of Economic Studies is currently edited by Thomas Chaney, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Kurt Mitman, Francesca Molinari, Katrine Loken and Elias Papaioannou

More articles in Review of Economic Studies from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().