While looking over some of the academic work done on information cascades, I came across a paper by Bikchandani, Hirshleifer, and Welch which seems to have been the basis or an influence on how Prof. Easley taught information cascades to us. The authors discuss High and Low signals, good and bad outcomes (here called desirable and undesirable) and Bayes rule. The paper itself is interesting if one wants to look further into some of the academic work done on this model.

http://www.jstor.org.proxy.library.cornell.edu/view/08953309/di014715/01p0058j/0?frame=noframe&userID=80549e6c@cornell.edu/01c0a8346c32ec118ee073e92&dpi=3&config=jstor

(It’s called “Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades” in Vol 3 No. 3 of the Journal of Economic Perspectives)

I want to suggest an application of this model. Cascades are interesting and fairly common. I remember seeing a few (or what I think could be considered a cascade) just after lecture. If after lecture you head out from the ground level toward the Statler, there was a dirt path that is currently being turned into a concrete one (and which is currently cordoned off). Now for the past few months it’s mostly been under snow and often muddy. Most people never took that path, preferring to walk the long way (on the already-established concrete path).

Perhaps there were issues of conformity here. Maybe someone unconsciously followed everyone else. Maybe once a person a group of friends went along the concrete path, everyone else in the group followed. Maybe during periods of snow the path’s shorter distance did not provide a high enough utility in the face of the extra mud and snow that the transverser would have to face. I think there are probably several factors at play in determining why a person chose a particular path, especially the longer, concrete one.

However, I can say that if a group of people was leaving (or heading to) the building and someone did decide to take the shorter path, whether it was snowy or muddy or what-have-you, that person was never alone. He or she would usually be followed by a few more individuals who would go across the path as well. In time there was enough of a trail that the administration decided to build a concrete pathway right over the shorter path.

Going back to the paper (and the lecture) it seems that the first intrepid souls who decided to trek over the unforgiving wastes made a decision based solely on the information they had (crummy path vs. cleared conconcrete path and shorter time vs. longer time), but that when that individual decided to go either way, he or she created a signal to others about the potential utility of that path. This apparently lead to more people following the shorter but dirtier path than before.