Information Cascades and the Adoption of Software
In a broad sense, the term information cascade is defined as an individual’s decision among multiple competing products. Each individual naturally has two sources of information:
- His own information – general knowledge of the product, or knowledge gained by reading about the product.
- The information given by others – reviews, word of mouth, etc
As we have seen in class, an information cascade can persuade individuals to make certain decisions based on their observations of others, and this same phenomenon can be observed in the adoption of software for computers.
According to the research paper linked below, “software downloading sites provide an excellent context for the study of informational cascades.” It is common knowledge in today’s society that there are thousands of programs available with similar applications, however, “to help online users make decisions, software downloading sites provide information on each program’s download counts and their ranking within each category.” In terms of information cascades, this type of available information on websites such as CNET, can significantly influence the decision to download certain applications by people who visit the site.
While this fact may seem fairly obvious, I believe this notion of downloading certain programs over others has become instinctive as computers and other electronic devices have become a large part of our everyday lives. Every time we decide to download a new program it is almost always because of a current trend, or one of our friends recommended it to us. This at its essence is an information cascade, we are ultimately making certain decisions based on what the general norm is at the time. Looking forward, it is hard to tell where we will be in terms of software 10 years from now, but looking at our decisions thus far, it is likely that information cascades will play a large role in our choices to adopt certain programs over others.
Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1103165