Information cascading

Ivo Welch, Sequential Sales, Learning, and. Cascades (1992)

Discusses a simple model of IPO, where the buyers get a binary signal and can observe the actions of the previous buyers.

Avery, Christopher & Zemsky, Peter, Multidimensional Uncertainty and Herd Behavior in Financial Markets, (1998)

Shows that introduction of a price mechanism in the market can eliminate some of the information cascading.

Banerjee Simple model of herd behavior , (1992)

Gives a very simple model, where agents, with some probability, get a real value signal (and otherwise get nothing). There is a probability that the signal is correct. The agents need to predict the true signal. The point is that any signal that is predicted twice is likely to be correct (probability 1) and therefore after that point the individual signals are ignored.

Sushil Bikhchandani, David Hirshleifer and Ivo Welch, A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades (1992)

Discusses the fragility of the information cascading. Very few theorems, and many motivating examples.

Chapter 16 Information Cascades. From the book Networks, Crowds, and Markets: Reasoning about a Highly Connected World. By David Easley and Jon Kleinberg

A very nice reading regarding the information cascading, although not very mathematical.