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The Rise of Smartphones

The first BlackBerry released in 2002 was the first smartphone optimized for wireless email use. Smartphone technology has evolved significantly since then, and the market for smartphones is ever expanding. According to a recent Pew Research survey, more than 1 in 3 of all U.S adults owns a smartphone. Smartphone shipments worldwide are projected to reach nearly 1 billion by 2015. This trend illustrates the phenomenon of an information cascade (also known as herding), which has the potential to occur when people make decisions sequentially. A person making a decision observes the actions of earlier decision-making people and from them infers something about what the people know. For instance, a consumer deciding what type of phone to buy will often inform themselves of or otherwise become aware of the actions of earlier buyers, and from these actions infer something about what earlier buyers know.

Other factors also influence a consumer’s decision of what type of phone to buy, such as direct benefit effects. A direct-benefit effect, in contrast to an informational effect, occurs when the actions of others affect one’s payoff directly, rather than indirectly by changing one’s information. For instance, a consumer evaluating which operating system of smartphone to buy will often consider the size of the user base of a particular phone operating system (such as Android, iOS, or Windows), which influences a consumer’s experience with that type of phone. This is true because a phone operating system will have a larger selection of apps if it has a larger user base, since it is often most beneficial for mobile app developers to use their time and resources developing apps for the largest user base possible. Additionally, a phone operating system with a larger user base would have a larger community of users to obtain troubleshooting support or advice. These factors (aside from customizability and other features) help to explain why Android, has the largest user base in the U.S. and continues showing significant growth.

The decision of which type of phone to buy is often exhibits both information and direct benefit effects. Think about this next time someone intending to buy a new phone inquires about the type of phone you have!




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