To follow the Herd or break away? Information Cascades as a result of Overconfidence

Abstract

We experimentally analyze how overconfidence in one’s relative expertise impacts cascade formation in the lab. We modify the informational cascade settings of Anderson and Holt (1997) and Noth and Weber (2003) to allow for signal accuracy to vary with an individual’s skill. Leveraging results from Moore and Healy (2008), we hypothesize that over-estimation in one’s ability, and over-placement of one’s ability (relative to others) end up delaying cascade formation. We design an experiment to test this hypothesis.

Mir Adnan Mahmood
Mir Adnan Mahmood
PhD Candidate, Department of Economics

My research interests include Experimental Economics, Economics of Information and Microeconomic Theory.

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