Information Cascade

An information cascade, or informational cascade, is a phenomenon described in behavioral economics and network theory in which a number of people make the same decision in sequence, a pattern related to but distinct from herd behavior. A cascade begins when an individual faces a decision, typically a binary one, and is influenced by outside factors such as observing the choices and apparent outcomes of people who decided earlier; each person in the sequence can observe the decisions of those before them but not the private information underlying those decisions, and so must infer that information from the decisions themselves. Because each person's action becomes evidence for the next, a cascade can lead a whole sequence of people to converge on the same choice, such as adopting a new technology or eating at a particular restaurant, even when much of that convergence rests on inference rather than independent judgment; researchers caution that the term is frequently confused with related but distinct ideas such as social proof and simple information diffusion.