◐ Behavioral
◆ The PatternWhen individuals rationally ignore their own private information and follow predecessors' actions.
Information cascades (Banerjee, 1992; Bikhchandani et al., 1992) — when individuals rationally follow others, ignoring their own private signals.
How a cascade forms:
1. Person A acts on their signal → buys
2. Person B sees A buy, combines with own signal → buys too
3. Person C infers from A+B → buys regardless of own signal
4. Everyone follows — even though total information is thin
Key insight: Cascades are fragile. A small credible contrary signal can shatter them → sudden reversal.
1. Person A acts on their signal → buys
2. Person B sees A buy, combines with own signal → buys too
3. Person C infers from A+B → buys regardless of own signal
4. Everyone follows — even though total information is thin
Key insight: Cascades are fragile. A small credible contrary signal can shatter them → sudden reversal.
Pattern bridge: Sequential decisions amplifying a signal regardless of private information. In ML, this mirrors gradient cascading in deep networks.