Information Cascade
Informational Cascade · Herding
When network participants pass on information they assume to be true, but cannot know to be true, based on information on what other users are doing.
Origin
Economists Sushil Bikhchandani, David Hirshleifer, and Ivo Welch formalized the theory in their 1992 paper "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades," published in the Journal of Political Economy. An informational cascade occurs when individuals, having observed the actions of those ahead of them, find it optimal to follow the behavior of predecessors regardless of their own private information. The paper demonstrated that cascades can often be mistaken, are fragile when new public information arrives, and can give disproportionate influence to early actors.