Do individuals recognize cascade behavior of others? : an experimental study

Tim Grebe; Julia Schmid; Andreas Stiehler

In an information cascade experiment participants are confronted with artificial predecessors predicting in line with the BHW model (Bikchandani et al., 1992). Using the BDM (Becker et al., 1964) mechanism we study participants' probability perceptions based on maximum prices for participating in the prediction game. We find increasing maximum prices the more coinciding predictions of predecessors are observed, regardless of whether additional information is revealed by these predictions. Individual price patterns of more than two thirds of the participants indicate that cascade behavior of predecessors is not recognized.

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Year of publication:	2006
Authors:	Grebe, Tim ; Schmid, Julia ; Stiehler, Andreas
Publisher:	München : Sonderforschungsbereich/Transregio 15 Governance and the Efficiency of Economic Systems
Subject:	information cascades \| Bayes' Rule \| decision under risk and uncertainty \| experimental economics \| Experiment \| Entscheidung \| Decision \| Informationsökonomik \| Economics of information \| Spieltheorie \| Game theory \| Entscheidung unter Risiko \| Decision under risk \| Herdenverhalten \| Herding \| Entscheidung unter Unsicherheit \| Decision under uncertainty \| Informationsverhalten \| Information behaviour \| Experimentelle Ökonomik \| Experimental economics