Availability Cascades: Understanding the Bias

An availability cascade is a fascinating self-reinforcing cycle that sheds light on how collective beliefs can develop within a society. It starts with a novel and seemingly insightful idea that simplifies a complex concept, quickly gaining popularity in public discourse due to its apparent clarity. As more people adopt this idea, driven by the need to conform and appear up-to-date with prevailing beliefs, it gains even more traction. The illusory truth effect comes into play, leading individuals to believe the repeated idea as true, even if it is false. This phenomenon arises from the availability heuristic and reputational cascades, and it has significant implications in various domains, including finance theory and risk regulation. The Role of Availability Entrepreneurs Availability cascades occur through public discourse, such as news media and social networks, where individuals process incoming information to form private beliefs based on rational and semi-rational rules, including…