Information Cascade Experiment: General Knowledge Quiz

Abstract

Information cascade experiment has long history. In the canonical setting of the experiment, urn choice quiz is used where a correct urn is chosen at random from two types of urns and subjects answer which urn is the correct one with private signal and the observation of previous subjects’ choices. In this chapter, we use general knowledge two-choice quiz in the experiment. The subjects answer sequentially after observing the summary statistics of the number of subjects who have chosen each option. We estimate the response function f(z) of the subjects that describe the probability of the correct choice under the influence of the ratio of correct answers of the previous subjects. As the difficulty of the question changes, f(z) changes, which results in the change in the number of equilibrium of the nonlinear Pólya urn. When the question is easy and there is one equilibrium, the domino effect disappears, and the majority choice always converges to the correct answer. When the question is difficult, there appear two equilibria, and the domino effect continues forever. If the first subject chooses a wrong option, it continues to affect the later subjects. The probability that the majority choice converges to a wrong option increases by the first subject’s choice.