Interacting information cascades: on the movement of conventions between groups

James C.D. Fisher, John Wooders

Research output: Contribution to journalArticle

Abstract

When a decision maker is a member of multiple social groups, her actions may cause information to “spill over” from one group to another. We study the nature of these spillovers in an observational learning game where two groups interact via a common player, and where conventions emerge when players follow the decisions of the members of their own groups rather than their own private information. We show that: (i) if a convention develops in one group but not the other group, then the convention spills over via the common player; (ii) when conventions disagree, then the common player’s decision breaks the convention in one group; and (iii) when no convention has developed, then the common player’s decision triggers the same convention in both groups. We also show that information spillovers may reduce welfare, and we investigate the surplus-maximizing timing of spillovers.

Original languageEnglish (US)
Pages (from-to)211-231
Number of pages21
JournalEconomic Theory
Volume63
Issue number1
DOIs
StatePublished - Jan 1 2017

Keywords

  • Cascades
  • Information spillovers
  • Observational learning
  • Social networks

ASJC Scopus subject areas

  • Economics and Econometrics

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