Y2K Bibliography of Experimental Economics and Social Science
Information Cascades and Herd Effects

updated December 29, 1999
Charles A. Holt, cah2k@virginia.edu, suggestions and corrections welcome
(for online and personal use only)

Allsopp, Louise, and John D. Hey (1999) “Two Experiments to Test a Model of Herd Behavior,” University of York, Discussion Paper. Keywords: experiments, decisions, cascades, information, herd behavior, Bayes' rule. Abstract: This paper provides an experimental test of the Banerjee model of herd behavior. Herding does occur, but not as frequently as theory predicts. Herding is affected by the probability of receiving a signal and by its accuracy, contrary to theoretical predictions. Email Contact: jdh1@york.ac.uk

Anderson, Lisa, and Charles A. Holt (1996) “Classroom Games: Information Cascades,” Journal of Economic Perspectives, 10:4 (Summer), 187-193. Keywords: experiments, classroom games, decisions, information cascades, Bayes' rule. Abstract: This paper describes a simple classroom game in which students rely on others' information as cascades form. The experiment can be used to stimulate discussions of Bayes' rule and informational inferences in interactive contexts. Email Contact: lrande@mail.wm.edu

Anderson, Lisa, and Charles A. Holt (1997) “Information Cascades in the Laboratory,” American Economic Review, 87:5 (December), 847-862. Keywords: experiments, information, decisions, cascades, logit errors,. Abstract: When binary decisions are made sequentially, agents will use the information implicit in others' decisions, which will sometimes cause them to "ignore" their own information and follow the others in an information cascade. Such behavior is observed in laboratory experiments reported here. Email Contact: lrande@mail.wm.edu

Anderson, Lisa, and Charles A. Holt (1998) “Information Cascade Experiments,” in Handbook of Experimental Economics Results, edited by C. R. Plott and V. L. Smith, New York: Elsevier Press, forthcoming. Keywords: experiments, information, survey, information cascades, information, Bayes' rule. Abstract Results of information cascade experiments are summarized. Email Contact: lrande@mail.wm.edu

Anderson, Lisa R. (1999) “Payoff Effects in Information Cascade Experiments,” College of William and Mary, Discussion Paper. Keywords: experiments, decisions, information cascades, methodology, incentive effects, logit equilibrium. Abstract: The paper reports the effects of changing payoff levels on behavior in information cascade experiments. Offering a $2 payment for a correct prediction lowers logit error rates estimated with a logit model, below levels obtained with hypothetical incentives. A doubling the payoff to $4 does not produce a further reduction in the error rates. Email Contact: lrande@mail.wm.edu

Goidel, Robert K., and Todd G. Shields (1994) “The Vanishing Marginals, the Bandwagon, and the Mass Media,” Journal of Politics, 56:3 (August), 802-810. Keywords: experiments, public,* voting.

Huck, Steffen, and Jörg Oechssler (1998) “Information Cascades with Continuous Action Spaces,” Economics Letters, 60:2 (August), 162-166**. Keywords: experiments, decisions, information cascades, Bayes' rule. Email Contact: huck@wiwi.hu-berlin.de, oechssler@uni-bonn.de

Hung, Angela, and Charles R. Plott (1999) “Information Cascades: A Replication and Extension to Majority Rule and Grand Jury Instructions,” American Economic Review, forthcoming. Keywords: experiments, decisions, information cascades, Bayes' Rule, majority rule. Email Contact: angela@hss.caltech.edu

Kraemer, Carlo, and Markus Nöth (1999) “Information Aggregation with Costly Signals and Random Ordering: Experimental Evidence,” University of Manheim, Discussion Paper, presented at the Fall 1999 European Regional ESA Meetings. Keywords: experiments, information, cascades, probability judgement, Bayes' rule. Abstract: Subjects are selected in a random order to make a decision on the basis of others' previous decisions and on a costly signal if it is purchased. About half of the subjects overestimate the value of a private signal, which results in excessive information purchases and reduced conformity. Email Contact: kraemer@bank.bwl.uni-mannheim.de

Kremer, Tobias, and Markus Nöth (1998) “Overconfidence and Information Cascades: Experimental Evidence,” University of Mannheim, Discussion Paper, presented at the Fall 1998 ESA Meeting. Keywords: experiments, decisions, overconfidence, information cascades, psychology, biases. Email Contact: noeth@bank.BWL.uni-mannheim.de

Lamoureux, C, and C. Schnitzlein (1997) “Herd Through the Grapevine: Winner's Curse in a Fragmented Asset Market,” University of Arizona, Discussion Paper. Keywords: experiments, markets, asset markets, dealer intermediation, off floor search, losses, experience. Abstract: In an asset market experiment with asymmetric information and competing dealers, a rule that allows traders to search "off floor" causes dealer bid-ask spreads to tighten, with the effect that dealer profits are reduced. These losses persist even after dealers have obtained considerable experience. Comparisons with the winner's curse are discussed.

Navazio, Robert (1977) “An Experimental Approach to Bandwagon Research,” Public Opinion Quarterly, 41:2 (Summer), 217-225. Keywords: experiments, public, questionaires.

Nöth, Markus (1999) “Greed and Fear: Information Aggregation with Endogenous Ordering in an Experiment,” University of Mannheim, Discussion Paper, presented at the Summer 1999 ESA Meeting. Keywords: experiments, information, information cascades, endogenous timing, Bayes' rule, information aggregation. Email Contact: noeth@bank.BWL.uni-mannheim.de

Nöth, Markus, and Martin Weber (1998) “Information Aggregation with Random Ordering: Cascades and Overconfidence,” University of Mannheim, Discussion Paper, presented at the Summer 1998 ESA Meetings. Keywords: experiments, decisions, information cascades with strong or weak private signals, Bayes' rule, overconfidence. Abstract: Subjects receive a noisy signal about whether the unknown state is A or B. The signal is informative, but the accuracy for a given signal is randomly determined to be high or low, which is also known to the subject. Participants make public predictions in a random order. Cascades are observed, but overconfidence reduces the incidence of reverse cascades. Email Contact: noeth@bank.BWL.uni-mannheim.de, weber@bank.bwl.uni-mannheim

Sadiraj, Klarita, Arthur Schram, and Sweder van Wijnbergen (1999) “Rational Behavior Versus Herd Behavior: Theoretical and Experimental Analysis,” University of Amsterdam, Discussion Paper, presented at the Fall 1999 European Regional ESA Meeting. Keywords: experiments, information, ponzi scheme, herd behavior, asymmetric information. Abstract: The ponzi scheme setup has two types of players; the informed players have information that enables them to decide when to withdraw their investment. In the experiments, the uninformed react to the choices of the informed in a kind of herd-like behavior.

Verstegen, J., Joep Sonnemans, Ruud B. M. Huirne, Aalt A. Dijkhuizen, and James C. Cox (1998) “Quantifying the Effects of Sow-Herd Management Information Systems on Farmers' Decision Making Using Experimental Economics,” American Journal of Agricultural Economics, 80(November), 821-829. Keywords: experiments, decisions, agricultural economics, information. Email Contact: jcox@bpa.arizona.edu

Ziegelmeyer, Anthony* (1998) “Information Externalities and Endogenous Timing of Decisions: A New Experimental Evidence with Many Agents,” University Louis Pasteur, Strasbourg, Discussion Paper, presented at the Summer 1998 ESA Meeting. Keywords: experiments, information, cascades. Abstract: The subjects in the experiment must decide when to make a decision. The advantage of waiting is that it allows one to learn from others' decisions, but waiting is costly. In this setup, the timing of decisions is endogenous, and there exist asymmetric pure-strategy equilibrium in which some people go first and others wait, even though they have equally informative signals. Email Contact: sas@cournot.u-strasbg.fr