Abstract

Abstract: Informational cascades occur when rational individuals ignore their own private information and instead mimic the actions of previous decision makers. Such herd behavior is commonly found in the adoption of emerging information technologies. Because the loss of information efficiency resulting from informational cascades could lead to IT overbuilding or the adoption of inferior technologies/standards, this paper discusses the causes of cascades and addresses some relevant managerial issues. It examines the relationship between informational cascades and network effects that may also cause herding in IT adoption. It also discusses how conversational learning and negative payoff externalities affect IT adoption cascades.

Citations