An information cascade occurs when individuals, having observed the actions and possibly payoffs of those ahead of them, take the same action regardless of their own information signals. Informational cascades may realize only a fraction of the potential gains from aggregating the diverse...

I study a market in which a profit-maximizing intermediary facilitates trade between buyers and sellers. The intermediary sets prices for buyers and sellers, and keeps the difference as her fee. Optimal prices increase with demand and, under plausible conditions, the optimal percent fee...

An information cascade is a situation in which an agent who observes others chooses the same action irrespective of the value of the agent's private information signal. Theoretical models have found that cascades result in poor information aggregation, inaccurate decisions, and fragility of mass...

We review the theory of information cascades and social learning. Our goal is to describe in a relatively integrated and accessible way the more important themes, insights and applications of the literature as it has developed over the last thirty years. We also highlight open questions and...

Policymakers often express concern that herding by financial market participants destabilizes markets and increases the fragility of the financial system. This paper provides an overview of the recent theoretical and empirical research on herd behavior in financial markets. It addresses the...

Preferences may arise from regret, i.e., from comparisons with alternatives forgone by the decision maker. We ask whether regret-based behavior is consistent with non-expected utility theories of transitive choice and show that the answer is no. If choices are governed by ex ante regret and...