Information Cascades and New Technology
https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.93.892&rep=rep1&type=pdf
The research paper “RUNNING WITH THE PACK: AN EMPIRICAL EXAMINATION OF INFORMATION CASCADES IN THE ADOPTION OF NOVEL TECHNOLOGIES” by Eric A. Walden and Glenn J. Browne uses the theory of information cascades to describe how specific technologies become incorporated into everyday systems. Specifically, the authors develop an information cascade using the BHW model and then add more complicated information to create a more complicated and accurate model.
Cascades are the main topic of discussion throughout the paper, even providing a colored marble and bucket scenario to help explain the concept. This is the exact scenario described during lecture to help explain information cascades. This concept is used to develop a model to help companies pick the appropriate technologies to include in their product. An example provided by the paper points to the past where companies decided not to go with windows/intel or VHS. Since a cascade had formed saying these were the best technologies to use(even though they weren’t) the companies that decided to include other technologies either lost profit, or went completely out of business. Even though a company conducts research to prove one technology is better than the other, outside opinions can cause an inferior form of tech to become mainstream due to a cascading effect.
While the model presented in the paper was initially simple, more complicated information needed to be added to provide a more accurate result. In the real world, the price of new technologies is constantly changing. Companies must also include this piece of information in their decision making process, since price may cause a change in opinion. However, a general piece of information that was also included in the cascade model is if technology improves over time, it is reasonable to assume that the value of adopting that technology will increase. While simple models can help with understanding cascades, more information is often needed.