Information Cascade in Online Shopping
Nowadays, many people buy things online, mainly out of convenience but also because there is a massive catalog offering more options. However, this also means that every shopper has to deal with choice overload, a paradox we deal with constantly. For instance, when there are too many ice cream flavors, we tend to spend way more time convincing ourselves that the one we selected is the one we want. This is extremely prevalent in eCommerce since a mere search on Amazon for jeans or sneakers will yield tens of thousands of results. Now, how do people select which one they want?
This research paper dives into how product ratings and online reviews form an information cascade, influencing the choices that people make when choosing which product they want to buy. The paper brings up the point that everyone has a limited amount of time so they can’t possibly go through all the possible products from a search query so after a few reviews are placed on a product, people will generally choose to buy that specific result. However, it is important to note that in the real world, there are deviances but, the paper states that as long as people have similar preferences and are rational, they will buy the products with high ratings and avoid those with poor ratings.
Another interesting discussion that the paper brought up was from the perspective of businesses. Obviously, every business is trying to sell its products so one possibility to beat the information cascade is by lowering prices so that people have to consider the options based on price as well. While research has shown that depending on people, they might interpret the price as a sign of the quality of the product and thus still choose the higher priced product but, in the sense of information cascades, buyers avoid their own signals of price preferences and follow the crowd. As a result, in many situations, despite being more expensive than similar counterparts, certain products with many positive ratings will still be bought by online shoppers.
Out of all the topics we have covered in networks class, I feel like information cascades can be seen the most clearly as we can just go on any online marketplace and see the effects. Therefore, the applications of information cascades are extremely widespread and important to keep in mind as online shoppers so we can find the best price for the products that we want.
https://dl.acm.org/doi/pdf/10.1145/3482632.3487492