Information Cascades in Online Movie Ratings?
This study examines a real-life application of information cascades and the herding phenomenon. Information cascades can be observed in everyday activities such as online movie ratings. In this study, the effects of observation learning from preceding crowd and friends on individual’s movie ratings and the occurrence of herding in such events are analyzed. Th online discussion of movies among friends and acquaintances is taken as a virtual word-of-mouth model among the raters.
Information cascades is when an individual follows the behavior of preceding individuals based on observations of their actions. In this case, the individual does not regard his or her own information and decides to trust and follow the decisions of those who rated before him or her. Herding is a phenomenon in which individuals all come to a uniform social behavior. This study focuses on an online movie rating community, where the user (rater) information and the average rating for the movies are shared. Previous ratings of the movies and the average rating of a movie are displayed, which was shown to have a visible effect on an individual’s own rating of the movie. Herding was apparent here — if the previous rater gave the movie a high rating, it was more likely for the rater to give the movie a high rating as well. Individuals look at the choices previous raters have made, and they gain “perceived quality about the movie” that ends up affecting their decisions on rating the movie. For example, on average if the movie has been rated poorly, the individuals are more likely to think of the movie poorly as well. However, the impact of the previous rater gets weaker as the volume of the (rater’s) friend ratings increases. This may be due to the idea that the friends’ review of the movies are similar to the concept of offline word-of-mouth.
The idea of information cascades can be applied in everyday happenings such as online movie ratings. Whether people are aware of this or not, the average rating of the movie and the written reviews of other people actually develop bias in their minds. Such herding can either positively or negatively affect the market: if the movie has a high rating, it is more likely to get more positive views, but if the movie has a low rating, it is even more likely to get negative reviews. This can also prevent quality information-based decision making. This study suggests increasing social interactions as a possible solution to this, since increased private quality flow from people we trust may direct us back to our own opinions and information, rather than blindly going with the choices others (strangers) have made before us.
Source: https://www.misrc.umn.