An investigation on the influence of friends in information cascade - experimental evidence in laboratories.

This paper examines the impact of relationships on the occurrence of cascade outcome by conducting the ball and urn experiment on the Friend treatment and Stranger treatment under laboratory conditions. By implementing the standard BHW model which argues information cascading using Bayes’ rule and b...

Full description

Saved in:
Bibliographic Details
Main Authors: Lim, Wei Jie., Yap, Wan Yi., Yeo, Yee Teng.
Other Authors: School of Humanities and Social Sciences
Format: Final Year Project
Language:English
Published: 2013
Subjects:
Online Access:http://hdl.handle.net/10356/52107
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Nanyang Technological University
Language: English
Description
Summary:This paper examines the impact of relationships on the occurrence of cascade outcome by conducting the ball and urn experiment on the Friend treatment and Stranger treatment under laboratory conditions. By implementing the standard BHW model which argues information cascading using Bayes’ rule and by performing multinomial logistic model, it was concluded that there is a significant increase in cascade outcome moving from the Stranger treatment to the Friend treatment. With the presence of trust among friends, it could lead to a cascade of influence and hence, the higher probability of cascade formation. An extension of the study is to perform a similar experiment by using an investment setting. The result shows that there is no treatment effect under an investment situation and this finding was proven insignificant by the multinomial logistic model. Possible explanations may be due to the increase in uncertainty and randomness in one’s private signals and the belief that strangers may have additional information which is not accessible to friends within similar network surroundings.