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Everyday Information Cascades

Studying information cascades as an abstract mathematical network phenomenon covers all the fundamentals, but learning everyday examples gives a more complete picture.  In the article, “Mass Movements: Information Cascades,” an anonymous The Economist writer uses Netflix as an example of a stock price impacted by information cascades.  At first, the Netflix stock was only increasing and increasing due to more buyers.  The Netflix stock had followed an information cascade.  Once the word spread that large groups of people were buying Netflix shares–which would cause the price to go up–others wanted to jump on the skyrocketing Netflix stock before it was too late.  Now, had there been fewer initial buyers, or less influential initial buyers, the information cascade may have never happened.

 

The writer moves on to highlight other practical examples of information cascades.  One other important everyday example of information cascades is at a more political level.  Political information cascades could be as small as jumping on the bandwagon for some minor issue, or joining a widespread revolution.  Information cascades give a glimpse into the power of human networks, whether financial, political, or otherwise.

 

http://www.economist.com/blogs/democracyinamerica/2011/10/mass-movements

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