Question: Alevy & List (2005) find that when we compare the behavior of financial professionalswiththatofuniversitystudents inaninformationalcascadeexperiment,thefinancialprofessionalsarelesslikelytomakedecisionsconsistentwith Bayesrule,butatthesametimetheyarealsolesslikelytogetcaughtupinareversecascade.Arethesetwofindings consistentwithone another?Whyorwhynot?Explain.[Hint:Whatdotheyimplyaboutthekindofmistakesthatfinancial professionalsarelikelymakingwhenviolatingtheBayesrule?]

Alevy & List (2005) find that when we compare the behavior of financial professionals with that of university students in an informational cascade experiment, the financial professionals are less likely to make decisions consistent with Bayes rule, but at the same time they are also less likely to get caught up in a reverse cascade. Are these two findings consistent with one another? Why or why not? Explain. [Hint: What do they imply about the kind of mistakes that financial professionals are likely making when violating the Bayes rule?]

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