Information Cascades in Online Movie Ratings
An information cascade is when a person observes the actions of others and follows what the others do regardless of any private information they receive. They often occur when people make decisions sequentially with the later people following the behavior of the previous people. Information cascades cause a kind of rational imitation where people infer information from the people before them and decide to act accordingly. Information cascades occur in online movie ratings and can affect the sales of a certain movie. Netflix integrated with Facebook in 2009 to take advantage of information cascades because people would be able to see which movies their friends were watching and thus more likely cause herding to occur so that many people would start watching the same movie. The online movie ratings are also affected by the information cascades.
When writing a review for a movie, people can see what reviewers wrote before them. This often influences the current reviewer. As stated before, this kind of sequential behavior causes an information cascade. The article describes a study on movie reviews online. They analyzed the reviews on Flixter.com which is an online movie social networking community. They found that if your friends on Flixter gave positive reviews of a movie then you were also more likely to give a positive review of the movie regardless of what professional critics say and the same also applies to if your friends gave negative reviews. This is just like an information cascade where people ignore the private signal (professional critics) and follow the behavior of the majority of people before them (friends). This also affects the sales of movies as people often go to movies based on the reviews online. Information cascades play an important role in our daily lives.
Article: https://www.misrc.umn.edu/workshops/2010/fall/OnlineUserRating.pdf