Information Cascade Experiment: Urn Quiz

Abstract

Canonical setup of information cascade experiment uses two-choice urn quiz. Based on the model by Bikhchandani et al. (J Polit Econ 100:992–1026, 1992), L.R. Anderson and C.A. Holt performed an experiment where six subjects answered two-choice quiz one by one after observing the previous subjects’ answers. They observed information cascade where a subject discards one’s private information and follows the majority choice. After the experiment, many experiments have been performed, and the length T of the subject sequence reached 40 in the experiment by Goeree et al. (Rev Econ Stud 74:733–762, 2007). In the experiments, there are two urns which contain red and blue balls in different compositions. One urn is chosen as an answer at the beginning of the experiment, and subjects answer which urn is the correct one with the private signal and the observation of the previous subjects’ choices. By the control of the composition of red and blue balls in the urn, it is easy to control the precision of private signal or the difficulty of the quiz. Similar to the experiment of the general knowledge quiz in the previous chapter, as the difficulty of the quiz increases, the response function f(z) changes, which results in the change in the number of stable state. We study the correlation function of the domino effect in information cascade and understand the micro-macro feature of the system.