Movers and Shakers

Robert Akerlof () and Richard Holden ()
Additional contact information
Robert Akerlof: University of Warwick
Richard Holden: UNSW Australia Business School

No 2015-18, Discussion Papers from School of Economics, The University of New South Wales

Abstract: Most projects, in most walks of life, require the participation of multiple parties. While it is difficult to unite individuals in a common endeavor, some people, whom we call “movers and shakers,” seem able to do it. The paper specifically examines moving and shaking of an investment project. We analyze a model with two types of agents: managers and investors. Managers and investors initially form social connections. Managers then bid to buy control of the project, and the winning bidder puts effort into raising awareness of the project among investors. Investors who become aware receive private signals of the project’s quality. Finally, they choose whether to invest in the project, whose return is a function both of its quality and aggregate investment. We characterize the equilibrium of this game, including the endogenously formed network structure and payoffs. We show that, while managers are identical ex ante, a single manager emerges as most connected; these connections confer the ability to increase aggregate investment (i.e., “move and shake” the project); he consequently earns a rent. In extensions, we move away from the assumption of ex ante identical managers to highlight various forces that lead one manager or another to become a mover and shaker. Finally, we explore various applications, including: entrepreneurship, funds management, and seed capital.

Keywords: Global games; investment; network capital. (search for similar items in EconPapers)
JEL-codes: D20 D85 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2015-09
New Economics Papers: this item is included in nep-mic, nep-net and nep-ppm
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Journal Article: Movers and Shakers (2016)
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