Enhancing Information Through Aggregation

Many information sources, including standard accounting reports, employ aggregation. Although aggregation is commonly associated with loss of information, this paper shows that it can sometimes enhance information by deterring information cascades. Aggregated information increases the uncertainty faced by interested observers. This makes observers more willing to abide by their own views and choose actions that reveal this viewpoint rather than simply parrot the crowd. This result provides one explanation for the seemingly puzzling persistence of aggregated information sources in a technological age where information transmission is almost costless.