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Computational Economics

, Volume 53, Issue 1, pp 207–225 | Cite as

Observing Cascade Behavior Depending on the Network Topology and Transaction Costs

  • Joohyun Kim
  • Ohsung Kwon
  • Duk Hee Lee
Article
  • 118 Downloads

Abstract

The Internet, smartphones, Social Networking Service, and other IT goods have improved the overall quality of life, but created an over-connectedness with extremely low transaction costs in our society, amplifying latent social problems. In light of this, we demonstrate the main mechanism of information cascades in various network topologies using computational model that can consider autonomous agents, the adoption of others’ decisions, and network topologies. Our findings reveal that: (1) lower transaction costs may amplify the occurrence of information cascades; (2) the network structure significantly affects the behavior of traders in terms of the individual and the whole market; and (3) highly spread trend-shift cascades can be observed in scale-free networks when the influence of a dominant agent’s decision significantly affects the connected agents. Such findings highlight how a highly over-connected network has its critical shortcomings.

Keywords

Transaction costs Information cascades Trend shift cascades Network topology 

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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.Naveen Jindal School of Management at the University of Texas at DallasRichardsonUSA
  2. 2.School of Business and Technology Management, College of BusinessKAISTDaejeonRepublic of Korea

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