© 1996 Oxford University Press
research-article |
Learning from the Experience of Others: An Experiment on Information Contagion
aDipartimento di Economia e Studi Aziendali, Università di Bologna, andComputable and Experimental Economics Lab, Università di Trento Italy
bDipartimento di Economia e Direzione Aziendale, Università di Venezia, andComputable and Experimental Economics Lab, Università di Trento Italy
Abstract
Advances in stochastic system analysis have opened the way to a reconsideration of the processes through which behaviors spread in a population of individuals or organizations. One peculiar phenomenon affecting diffusion is information contagion (Arthur and Lane, 1993). When agents have to choose on the basis of other people's experience, rather than relying on their own direct observations, information externalities arise that drive towards the emergence of the arbitrary, stable dominance of one product over the competing one. We reproduced in controlled laboratory conditions the process of information contagion. The experiments show that when agents can only resort to the observation of other people's experience in choosing between competing alternatives, the choice process generates some peculiar features: (i) information contagion among subjects generates self-reinforcing dynamics, amplifying initial asymmetries of products' market shares; (ii) this in turn produces path-dependent trajectories, highly dependent on early events in the choice sequence; (iii) arbitrary asymmetric market shares tend to be stable in the long run, exhibiting lock-in phenomena; (iv) agents choice criteria are heterogenous, giving rise to a mix of positive and negative feedback in the choice process, with the mix and the timing of such criteria affecting the final outcome.