Diversity of Opinion and Financing of New Technologies

Franklin Allen () and Douglas Gale ()

Working Papers from C.V. Starr Center for Applied Economics, New York University

Abstract: The objective is to compare the effectiveness of financial markets and financial intermediaries in financing new industries and technologies in the presence of diversity of opinion. In markets, investors become informed about the details of the new industry or technology and make their own investment decisions. In intermediaries, the investment decision is delegated to a manager. She is the only one who needs to become informed, which saves on information costs, but investors may anticipate disagreement with her and be unwilling to provide funds. Financial markets tend to be superior when there is significant diversity of opinion and information is inexpensive.

Keywords: Diversity of opinion; investment; financial markets; financial intermediaries; delegation; Bayesian decision making; uncommon priors (search for similar items in EconPapers)
JEL-codes: D8 G1 G2 (search for similar items in EconPapers)
Date: 1998
View citations in EconPapers

Downloads: (external link)
http://econ.as.nyu.edu/docs/IO/9381/RR98-29.PDF (application/pdf)

Related works:
Working Paper: Diversity of Opinion and Financing of New Technologies (1999)
Journal Article: Diversity of Opinion and Financing of New Technologies (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cvs:starer:98-29

Ordering information: This working paper can be ordered from
C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012

Access Statistics for this paper

More papers in Working Papers from C.V. Starr Center for Applied Economics, New York University
Address: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
Contact information at EDIRC.
Series data maintained by Anne Stubing ().