A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades

Sushil Bikhchandani, David Hirshleifer, and Ivo Welch

Journal of Political Economy, October 1992


An informational cascade occurs when it is optimal for an individual, having observed the actions of those ahead of him, to follow the behavior of the preceding individual with regard to his own information. The authors argue that localized conformity of behavior and the fragility of mass behaviors can be explained by informational cascades.

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