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The Emergence and Importance of Prestige in Information Cascades

The social development of prestige can be described through information cascades, a herding effect that arises in networks through sequential decisions made by many groups of people. The prestige that a famous individual has comes from his perceived societal standing that has been decided by the public. For example, one might praise a famous actor for his ability to convey emotion or for his charismatic personality, but the prestige of his celebrity status ultimately comes from the decisions of many others that hold him up to such regard. This is why he has achieved celebrity status while some struggling actor who could be equally talented and personable has not. As more and more people learn about a famous individual, the celebrity’s prestige inherently goes up.

Prestige often has an integral role in the development of information cascades. In particular, the occupation or status of an individual may influence the behaviors of a crowd without any direct action other than his own presence or decision. In the following article, President Barack Obama’s visit to a local book store called One More Page Books generated a 20 percent increase sales. Simply by being there, he had endorsed the place. For the ordinary consumer, a decision is made on where to buy a product. Rational factors like the size and selection of books, the friendliness or helpfulness of the employees, etc. may play a role in coming to a decision on where to go. However, the deciding factor may come from the behaviors of others, and especially so from individuals with notable social influence. Obama’s decision to go to One More Page Books over another nearby book store would therefore sway others to go to One More Page Books as well. People follow Obama’s preference in book stores not because he is all knowing in the matter of books, but because of the sense of authority that arises from the prestige of his occupation. By associating the importance of the President with the individual decisions he makes, one may infer that the book store Obama ends up going to would have good enough qualities to attract someone so important. As the book store grows more popular as a result, even more people would visit because of its established popularity, and subsequently an information cascade is created.

http://www.bizjournals.com/washington/news/2014/04/17/the-potus-prestige-effect-when-presidents-visit.html

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