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The wisdom of the crowd when acquiring information is costly
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Glazer, Jacob, Kremer, Ilan and Perry, Motty (2021) The wisdom of the crowd when acquiring information is costly. Management Science, 67 (10). pp. 6443-6456. doi:10.1287/mnsc.2020.3792 ISSN 0025-1909.
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Official URL: https://doi.org/10.1287/mnsc.2020.3792
Abstract
We consider a sequential investment process that is characteristic of crowdfunding platforms, among other contexts. Investors wish to avoid the cost of information acquisition and thus prefer to rely on information acquired by previous investors. This may lead to a phenomenon similar to an information cascade. We characterize the optimal policy that balances between the incentive to acquire information and the optimal investment decision. The policy is based on time-varying transparency levels such that it may be worthwhile to conceal some information in some periods.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HG Finance | ||||||||
| Divisions: | Faculty of Social Sciences > Economics | ||||||||
| Library of Congress Subject Headings (LCSH): | Crowd funding -- Econometric models, Online social networks -- Economic aspects, Mass media -- Economic aspects, New business enterprises -- Econometric models, Risk management -- Econometric models | ||||||||
| Journal or Publication Title: | Management Science | ||||||||
| Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||||||
| ISSN: | 0025-1909 | ||||||||
| Official Date: | October 2021 | ||||||||
| Dates: |
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| Volume: | 67 | ||||||||
| Number: | 10 | ||||||||
| Page Range: | pp. 6443-6456 | ||||||||
| DOI: | 10.1287/mnsc.2020.3792 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Copyright Holders: | Copyright © 2021, INFORMS | ||||||||
| Date of first compliant deposit: | 10 July 2020 | ||||||||
| Date of first compliant Open Access: | 15 July 2020 | ||||||||
| Related URLs: |
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