Information Cascades and Revolutions, Riots
https://voxeu.org/article/riots-and-revolutions-digital-age
The authors of this article (Ellis and Fender) explain how they used information cascades to explain how a political regime change occurs or how the threat of revolution forms. For instance, Ellis and Fender found that workers choose to rebel or not based on other workers’ decisions and the state that the regime is in. This is similar to the concepts we discussed in class, particularly the high and low signals received based on states of the world, and how that along with our perception of others’ decisions affects our own decisions. If enough workers start rebelling, then an information cascade is created and a revolution occurs. This is similar to the problem we tackled in class with blue and red marbles, where if a particular coloured bag was guessed enough times, then the remaining students would also guess that colour. Ellis and Fender also argue that it is the rise of technology that exacerbates the information cascade, through social media such as Twitter and Facebook.
Another example where information cascades are applicable is in the case of rioting. Ellis and Fender combine information cascades and their multiple equilibrium theory of crime, where potential criminals evaluate the benefits and costs of committing the crime (i.e probability of being punished and the punishment itself). Information cascades play a role here in escalating the belief that there exists a low-crime equilibria instead of a high-crime equilibria. This once again reminds me of the scenario in class where students had to guess which colour bag (in this case, rioters estimate the equilibria) and once sufficient consistent beliefs have been expressed, the rest of the students (rioters) follow the same belief.