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Information Cascades
“Several matching choices can make you suppress a private signal pointing the other way.”
01 / SUMMARY
In short
An information cascade occurs when earlier actions lead rational participants to follow the group and stop using private information. It may grow from little independent evidence and break after one strong public signal.
03 / SCENE
In the wild
Two diners enter a restaurant on private signals; later arrivals see the line and choose without knowing those signals.
04 / LIMIT
The limit
Following a cascade does not imply stupidity or show that every fad works this way.
FINAL NOTE
What remains
Separate the number of observed decisions from the independent sources that produced them.