Effects of information cascades on collaborative decision-making
In lecture we covered the topic of information cascades. A situation where a group of people would guess, in order, about the state of something using private information and the guesses of other people, after a number of consecutive guesses the other peoples guesses will out weigh private information and one guess will become dominant. The example we covered was colored marbles in bags were students wanted to guess the majority color present in the bag. Students would draw and replace a marble from the bag and announce a guess as to which color was the majority color in the bag weighing both the information they received from drawing the marble and the guesses of the previous students. In our example the private information was represented as the color of the marble they drew. In more complex systems private information is not as easy to obtain as the example we covered. Obtaining private information can be a time consuming and costly procedure. Another factor not included in our class example is the idea of trust, if you don’t trust the other people involved you may not weigh their guesses as heavily as your private information. Contrarily, if you trust the other people involved you may be less likely to seek out private information or may be less likely to introduce your private information if it goes against what the other guesses have suggested.
In the paper linked below the relative ease of producing a project, the innovation of the solution, and when the stakeholders were involved in the decision process were recorded for various river engineering projects along the Rio Grande in New mexico. The author found that if stakeholders were involved later in a project, after the alternatives have been identified, the stakeholders often valiantly expressed concern for a project’s viability and designs were frequently sent back for changes. If stakeholders were involved from the beginning of the project, during the process of identifying alternatives, the project would reach completion with very little revisions. This compels the reader to think that involving stakeholders from the beginning would be the right choice every time, that is until the innovation of the projects is assessed. The author found that when stakeholders were introduced late in the design process the solutions found were extremely innovative, using input from nearly all the stakeholders. As for when the stakeholders were introduced early in the process, the solutions where adequate but typically embodied a single stakeholders solution with little input from the other stakeholders. The author relates this to the idea of information cascades; In late introduction, the stakeholders have not been given the opportunity to gain trust for other stakeholders and relied heavily on private information. This in turn created an atmosphere of heavy technical review for anything brought forward to the project. In early introduction the stakeholders are able to get comfortable with each other and develop trust between each other, given that private information is costly and time consuming and an atmosphere of trust has been developed many stakeholders may not pursue private information and will strictly work off the information provided by other stakeholders. Additionally, if a stakeholder has private information that is contrary to the ideas given by other stakeholders in a trusting environment he may be less inclined to bring this private information forward. To summarize the results, an environment with a high degree of trust is much more susceptible to information cascades which can result in mediocre group performance.
https://www.tandfonline.com/doi/pdf/10.1080/15715124.2014.928303