Information Cascades——An Experimental Research of Sequential Decision-Making Behavior Matching

Abstract

Abstract:

Using the behavioral analysis approach and the experimental method, this paper researches the information cascades and behavior matching of sequential decision-making, and divides sequential decision-making behaviors into three classes: Bayes rule decision, non-Bayes rule decision and balance. And then, we design specific experiments which include four treatments such as different subjects' types, symmetry and asymmetry urns. Results show that symmetry & asymmetry urns and decision order have significant effect on behavior pattern and efficiency, while subject's types, cumulative profit or loss do not. What's more, subjects prefer to make decision based on their private signals under balance condition because of endowment effect and ambiguity aversion. In this paper, we analyze sequential decision-making behaviors comprehensively and separate information cascades from them to find out the mechanism, characteristic and efficiency of information cascades. It has important theoretical and practical significance for understanding phenomena such as the bank run, the network group events and financial crisis.

Key words: information cascades, sequential decision-making, Bayes rule, behavior matching, experiment

Li Jianbiao, Wang Pengcheng, Ju Long. Information Cascades——An Experimental Research of Sequential Decision-Making Behavior Matching[J]. , 2015, 27(10): 84-94.

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