victim of information cascade
The blog post “Arresting irrational information cascades” by Robert Wiblin explains what information cascade is and discusses the negative effect of the cascade on our rational beliefs. He also suggests a few ways to avoid such a cascade. His illustration of the cascade comes with Person A, B and C where Person A is a significant member of the community and has a casual opinion from a little bit of information. Not acknowledging this fact, Person B adopts Person A’s belief and Person C respects “their” beliefs and follows it. Person A hears Person C and becomes more confident with his opinion and the cycle continues. This example matches what we have learned during our ECON2040 lecture. We’ve learned that there are two categories of rational reasons why people follow the crowd: 1) information-based and 2) Direct-benefit effect. Although we can’t describe Person A, B and C as a crowd, their actions can still be categorized into two described above. Person A is the one who provided information-based reason; A’s opinion convey little information, thus Person B followed the same opinion. Person B provided the second reason, Direct-benefit effect. Person C believed the opinion of Person A and B because sometimes being part of a crowd has a value in itself. In this situation, the benefit of belonging in a crowd can be sharing of their ideas together to gain more supports for their beliefs. In the blog post, Wiblin also explains the basic ingredients of information-based imitation, just like what we learned in our lecture: 1) some decision to be made, 2) people make the decision sequentially over time, 3) each person has some private info, and 4) you can see what earlier people did but not what they knew.
One of example of information cascade that I though of is the students who are following other’s blog post ideas. I’ve seen and heard of a lot of people writing about information cascade and its effect on Macbook and other Apple’s products. In fact, I can also be a victim of the information cascade. Among the topics that are covered in ECON2040 class, “Information Cascade” seems to be a simple model to explain and get examples of. Also, all my friends said that their blog posts are based on Information Cascade and thus I’m following the crowd! “Unfortunately, if everyone copies in this way, we can all end up doing something foolish.” (Wiblin) I have not tried to check whether this topic is really the easy one to write post for. Just like what Robert Wiblin commented in his post, “[I’m not] motivated to double check up on their evidence, then [I] might simply free-ride by copying them” I believe that there are many more behaviors of ours that illustrate the information cascade. Therefore, we should try to avoid such behaviors although it is a easy path in our life when making decisions.
http://www.overcomingbias.com/2012/10/arresting-irrational-information-cascades.html/trackback