Herd mentality and information cascades seem to be the buzz words nowadays: every major online social forum, from YouTube to Facebook to Digg, has been analyzed as the result of the many following the opinions of the first few. Once enough people decide that something is or isn’t popular, the rest will follow in their footsteps, oftentimes disregarding their own private information or preferences. When enough people start to follow the actions of the few, disregarding their own private information, their generally coherent and synchronized reactions and behaviors lead to the idea of herd mentality. Apart from social forums, the information cascade model (which tends to lead to the formation of the human herd) can be applied to anything involving sequential decisions where new decision makers see the decisions (but not the information) of people before them, and a more or less binary decision (such as buy/don’t buy, or digg/don’t digg).

Stephen J. Dubner, in his March 21st, 2007 blogpost titled Herd Mentality? The Freakonomics of Boarding a Bus, discribes an example of herd mentality in the simple process of boarding a bus during his morning commute in Manhattan. Like most New Yorkers, Dubner takes public transportation, specifically a crosstown bus, to get his daughter to her nursery school and himself to work and inevitably suffers the overcrowding during the early morning rush hour. The bus stop closest to their house happens to be the closest one to the local subway stop, meaning it suffers from particularly heavy overcrowding because of the spillover from people taking the subway and coming above ground to get across Central Park. The obvious problem is that the more people there are trying to get onto a bus, the less of a chance Dubner has for getting onto the first bus that comes by, and an even lesser chance of getting a seat for his daughter. As a solution, Dubner and his daughter have started walking to a bus stop further west (in the opposite direction of their final destination) because it is much less crowded and greatly increases their chances of getting onto the first bus that goes by and actually getting seats. While the new bus stop requires some walking to get to, Dubner finds the benefits much outweight the cost of walking and cannot understand why none of the other bus riders bother to walk to the new bus stop and try to outsmart the rest of the herd. He proposes several possible reasons for this behavior, but expounds that the strongest reason is that the riders at the overcrowded bus stop are part of the herd, and find comfort in being a part of the whole, so despite the benefits to the individuals of breaking away from the pack and walking a few extra steps to get to the next bus stop and actually get a seat, everyone tags along “because if everyone else is doing it, it must be the thing to do.”

While certainly the herd mentality aspect of the story is quite apparent, the information cascade is not as obvious. First of all, the idea of the information cascade depends on everyone knowing about the second bus stop and therefore having to make a choice between standing at the overcrowded one or walking to the farther one. Essentially, the information cascade occurs with the first few people. The first person to get to the bus stops see no one else and decides to stay there since they’re sure to get onto the bus. The next person sees the first person at the bus stop and decides that this must be a good place to wait for the bus. The next few people who sequentially get to the bus stop see the small group waiting, which often in the city means that the bus or train is sure to come soon, and decide to wait at the first bus stop because they see the decisions of the others and value them above their own logical idea that the other bus stop might be less crowded. This turns into an information cascade, as the more people that are waiting, the more will join them, thinking that there must be some reason the people already there chose this bus stop over the farther one (aside from the cost of the walk in between).

Dubner asks for other suggestions of herd mentality and the inherent information cascade. Quite a lot of responses were posted, and interestingly enough, the vast majority samples had nothing to do with social networks or stock markets, but with everyday life. For example: someone discusses the herd mentality of choosing a line at the supermarket, where people will get onto longer check-out lines despite short ones close by, because they see the decisions of those before them and possibly infer that the existence of this longer line must mean that the shorter one is about to close or is otherwise worse. Other examples include people waiting in long lines at any car toll, or at border crossings between the US and Canada: there are always one or two car lanes which are far longer than the rest, and until a cascade of cars start switching to the shorter lanes, people stay in these longer lines, despite an obviously better options. I thought of an example specific to my own experience. I am taking the Wines elective this semester, which meets every Wednesday in Statler Auditorium. There are around 700 students in the class, all with cafeteria trays and wine glass cases. I sit on the first level, which holds approximately 500 students. When class lets out, there is a mad rush for the main doors at the back of the auditorium on the first level because these doors lead to the main stairway. Every class period, the majority of the 500 students run for these two small doors, causing a 10 minute holdup while they file out in pairs. A few students have started taking the exits in the front of the class, which lead to a less central location to the building, but are just as close to some exit as the main doors. However, despite the fact that we’re several months into the class, the number of students taking the exits at the front of the room has not significantly decreased, leading to the same question brought up by Dubner. Just like the information cascade inherent in the bus stop situation, what occurs in our class is the first few people make the decision to go to the back doors because they are close to the central stairway, the next few people see these people choosing the back and follow them, because they see the first few people’s decisions and infer that the back way must be better and faster, and this develops into a full blown stampede to the back doors, despite the availability of other, less crowded exists.

I think examples of information cascades and herd mentality are abundant in everyday situations, and aren’t limited to the formal networks discussed in class. While the examples in class are easier to form proofs around (since they have been studied), it is interesting to try to find unconventional examples and see how the models apply there. It seems that the occurence of information cascades can be somewhat generalized to situations involving a decision that in part relies on chance and can result in a potential loss (such as the loss of time, money, social connectedness). The decisions have some cost to them (in the implied loss) and it is psychologically easier for people to follow the decisions of others than to make their own, because if you follow someone else’s decisions and they turn out to be wrong, there is less personal blame. Much like every other analysis of information cascades and herd mentality, Dubner’s story points to the individual losses that result from the many following the decisions of the few. What these analyses’ don’t consider, is the personal benefit of not being responsible for the losses caused by following the herd. Additionally, they don’t consider that perhaps people have some foresight and realize that if everyone starts going to the second stop to get onto the bus earlier, then the same situation would repeat itself. What’s the equilibrium solution to these real life information cascades then?