Bidding strategies for real-life small loan auctions
Decision Support Systems
Impact of network effects and diffusion channels on home computer adoption
Decision Support Systems
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Fads, from a cognitive perspective, are caused by informational cascades. It describes a situation in which people observe the actions of others and then make the same choice, regardless of their own information. Previous research on informational cascades suggested that behavioral conformity prevents information aggregation, and therefore the stability of an informational cascade need not increase as more people join the bandwagon. However, under information overload conditions, where there is more information than a person can handle, any one individual's information is a sample of the whole information pool. When assessing an existing informational cascade an individual can rule out the possibility that predecessors had enough information to shatter the cascade, as the cascade continues. In this way, information (i.e., that the cascade has not been rejected) is injected into cascade even when a new decision-maker simply follows predecessors' behavior. Taking this into consideration, we analyze the information threshold for rational conformity/deviation behavior, and propose a model that will measure information aggregation and evaluate the stability of informational cascades under an overloaded information setting. The results captured two primary behavioral aspects of informational cascade: information aggregation and diminishing sensitivity. The influences of product complexity and information revealing are also discussed.