Animal spirits in information cascade

Abstract

Purpose

The purpose of this paper is to better depict the features of individual and group behaviors in sequential decisions under the effect of public belief drift.

Design/methodology/approach

In this paper, the authors design a two‐shots game which is closer to decisions condition in the real market by using the method of experimental economics two shots game.

Findings

The experimental results show that information cascade occurs more frequently in the second stage and the decision accuracy is decreased. The conclusion may provide experimental evidence for the “Animal Spirits Theory” of Keynes. Additionally, decision‐maker ranking in the middle of the decision sequence systematically deviates from his/her private information in balance state.

Originality/value

As existing information cascade theory of one shot decision fails to describe the belief‐dependent mechanism, the authors design the multi‐shots information cascade experiment; in which every individual decision maker has more than one sequential decision chance on the same event.

Citation

Jianbiao, L., Guilin, L. and Long, J. (2012), "Animal spirits in information cascade", Nankai Business Review International, Vol. 3 No. 2, pp. 167-186. https://doi.org/10.1108/20408741211244415