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Information Cascade

There is a company and a website, Quirky.com, that uses the concept of “social product development” to develop consumer products for the market place. Quirky is based in NYC and consists of its founder, Ben Kaufman, numerous creative and technical staff, and its on-line community to bring two new products to market each week.

Anyone can join the Quirky community. A member of the community can submit product ideas (for a nominal fee), rate various prototypes, vote on designs, colors, etc. Participating community members earn “influence” points, which, if the product goes to market, translate into earned money, not only for the inventor, but also for all the community members that voted in sync with the final design decisions.

Just the other day, I reviewed a new product that was in the design phase of color schemes. The choices were various versions of white and/or black. I preferred a black and white version. When I looked at the existing votes, I saw that the all-white version was far and away the highest ranked choice among the community, and would likely win the day. If the all-white model was produced and sold, and if I voted for it, I had a chance of earning influence points and money. If, instead, I voted for the black and white version that I preferred, it wasn’t likely to be produced, and I would earn nothing for my participation.

There are two forces at work here. First, there is a direct-benefit effect from the payoff that I (or another) would receive from picking the winning color scheme. Second, there is the information cascade of seeing others’ choices. When a voter sees that among 4 color choices, one has more than 50% of the votes so far, what is the likelihood that the person to vote next will be influenced by the information cascade of the people before them.

How much influence does the information cascade of others’ votes have over product results? Is it possible that once an option begins to get more weight than the others, information cascade takes over and people no longer vote as they would individually, but rather based on the previous decisions of others?

On a more critical topic, what about polls in political elections, polls that happen close to or on election day? How much influence does the information cascade from these polls have on folks that haven’t yet voted? As reported in Wikipedia, countries such as Israel and France have laws that prohibit polling days or weeks before elections to prevent the effect of informational cascade that may influence the election results.
[Farnsworth, Ward (2007). The Legal Analyst: A Toolkit for Thinking about the Law. Chicago: University of Chicago Press]

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