http://tierneylab.blogs.nytimes.com/2007/10/09/how-the-low-fat-low-fact-cascade-just-keeps-rolling-along/

http://www.mnp.nl/images/EEM%20paper%20WJ_revised_tcm61-31259.pdf

In class we listed various examples of information cascades and also debated whether the herd mentality was a mainly irrational blind-leading-the-blind consequence or whether it was based more on the unavoidable ‘binary mathematics’ behind informational cascades.

As irresistible it is to ascribe much significance to the mathematics behind informational cascades, one must also consider the difference in cognitive effort attributed to different decisions. Wander Jager discusses this in his paper regarding consumer behavior, stating that ” the less important a decision is to a consumer, the less cognitive effort he would expend on the decision”.

What does this imply? Depending on the consumer’s own focus, he might well make decisions based on simple heuristics rather than careful rational considerations if the decision is one that is unimportant, like buying groceries or selecting which car wash to head for. On the other hand, if the decision is important, like buying a home entertainment system or a car, one would invest much more cognitive effort to understand the nuances between each choices, consider more signals and inputs from others before making a decision.

Making decisions based on simple heuristics most often means just ‘following’ the crowd, since ‘what everyone is doing can’t be wrong’ or alternatively, ’since everyone is doing it, there is a baseline where if the product is bad, everyone loses’. Such heuristics are often over-simplistic, and therein lies the greatest criticism of the herd mentality where people often blindly and irrationally follow the crowd in their decision making.

Information cascades does provide great insight on how rational thinking people do end up being part of a cascade, but it is wise to consider also that many often operate under simple heuristics when making unimportant decisions, and ultimately also contribute toward this cascade and the herd mentality.