Cascade’s Are Everywhere
Although you may not realize it, everyday you are making decisions solely off the choices of others. This is due to the occurrence of information cascades within your daily life. An information cascade is a situation in which a person makes a decision based on other’s behavior while ignoring their own intuition and information. This can be implemented in politics, economics, markets or almost any daily task.
Deciding which electives to take in college may very well create a cascade. Say there are a group of your friends all considering various courses to take for the following semester. When the first person decides to take a particular class then the rest of the group will likely follow the same decision even if they think another class may be more interested.
Much of a company’s decision making is influenced by information cascades. For example, if a single company begins marketing a discount a their store then most other stores will follow the same strategy as they do not wish to give any store a competitive advantage of a lower price.
Consumer’s decision to purchase a product of a certain brand can be heavily influenced by a cascade. The most popular cell phone is clearly an IPhone even though there are many devices with comparable features for a lower price. Most people will buy an IPhone simply because the majority of people they know have IPhone’s and they will not even consider another brand. Companies can use this behavior to their advantage by attempting to create cascades by giving their product to influential individuals that will cause those around them to purchase the product. This is why many celebrities will be sponsored by a company and given free products to either wear or use in public to influence others to follow their choices.
These cascades can be very large and influential, however, eventually they will come to an end. When new information is released or if rumors arise then this could influence an individual’s decision more than the cascade, thus ending the cascade.
Cascade’s can create extremely popular trends and be important in many major business decisions. These cascades can also influence small choices in an individual’s daily life. Most decisions you make will be influenced in some way by another’s choice and in some cases you will completely ignore you own intuition and information and simply go with the choice of others.
-Connor Ostrander
http://www.investopedia.com/articles/investing/052715/guide-understanding-information-cascades.asp