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Information Cascades: Replication and an Extension to Majority Rule and Conformity Rewarding Institutions

Hung, Angela A. and Plott, Charles R. (1998) Information Cascades: Replication and an Extension to Majority Rule and Conformity Rewarding Institutions. Social Science Working Paper, 1051. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20170811-134629257

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Abstract

In a randomly determined order, each agent was given an independent, private signal about which of two states was selected by a random draw. After receiving the private signal each agent made a publicly announced decision about the state. Thus, at the time of personal decision each agent had a private signal and also knew the decisions of all preceding agents. The experiments focused on three different types of organization. (1) Agents were rewarded according to whether their announced decision was right or wrong. This “individualistic institution" is the one studied by Anderson and Holt (AER, 1997). Their discovery of information cascades is replicated. (2) Agents were rewarded according to whether a majority of announced decisions were right or wrong. Under this “majority rule institution" the instance of information cascades is sharply reduced. (3) Agents are rewarded more according to whether their personal announced decision was the same as the majority decision than they were rewarded if their decision was correct. This "conformity rewarding institution" is motivated by proceedings in which there is incentive to produce reports that conform to the reports of others. Substantial information cascades are observed.


Item Type:Report or Paper (Working Paper)
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Alternate Title:Information cascades: Replication and an extension to majority rule and conformity-rewarding institutions
Additional Information:The financial support of the National Science Foundation and the Laboratory of Experimental Economics and Political Science is gratefully acknowledged. We are also deeply appreciative of the collaboration of David Winkler who developed the software programs and helped extensively with the experiments. Published as Hung, A.A., & Plott, C.R. (2001). Information cascades: Replication and an extension to majority rule and conformity-rewarding institutions. The American economic review, 91(5), 1508-1520.
Group:Social Science Working Papers
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Funding AgencyGrant Number
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Caltech Laboratory for Experimental Economics and Political ScienceUNSPECIFIED
Subject Keywords:Majority rule, Conformity, Efficiency decisions, Information production, Public information, Voting, Aggregation, Social psychology, Net income, Efficiency metrics
Series Name:Social Science Working Paper
Issue or Number:1051
Record Number:CaltechAUTHORS:20170811-134629257
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20170811-134629257
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80301
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:11 Aug 2017 21:17
Last Modified:03 Oct 2019 18:29

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