The Wisdom of the Crowd When Acquiring Information Is Costly

Jacob Glazer (), Ilan Kremer () and Motty Perry ()
Additional contact information
Jacob Glazer: Department of Economics, University of Warwick, Coventry CV4 7AL, United Kingdom; The Coller School of Management, Tel Aviv University, Tel Aviv 6997801, Israel
Ilan Kremer: Department of Economics, University of Warwick, Coventry CV4 7AL, United Kingdom; School of Business Adminstration and Department of Economics, Hebrew University, Jerusalem 9190501, Israel
Motty Perry: Department of Economics, University of Warwick, Coventry CV4 7AL, United Kingdom

Management Science, 2021, vol. 67, issue 10, 6443-6456

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.

Keywords: information processing; analytic modeling (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2020.3792 (application/pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:10:p:6443-6456

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().