Voluntary contributions in cascades: The tragedy of ill-informed leadership

Béatrice Boulu-Reshef and Nina Rapoport ()

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: undraising project unfolds with the sequence of decisions. This paper examines how the different sources of information available to potential donors in such settings influence their decision-making. Contrary to most of the leadership literature, neither leaders nor followers in these settings have certainty about the quality of the fundraising project. We explore whether leaders remain influential, the extent to which they use their influence strategically, and the consequences on followers when leaders are misinformed. We combine an information cascade method with a modified public goods game to create a “Voluntary Contributions in Cascades” paradigm. Participants sequentially receive private signals about the state of the world, which determines the potential returns from the public good, and take two public actions: an incentivized prediction about the state of the world and a contribution to the public good. We find that participants' predictions mostly align with Bayesian predictions, and find no evidence for strategic or misleading predictions. Leaders' contributions are positively correlated with followers', suggesting they remain influential despite their limited informational advantage. This influence takes a tragic turn when leaders happen to be misinformed, as most misinformed leaders end up unintentionally misleading followers. We find that having a misleading leader is associated with a reduction in gains from contributions roughly twice as large as the reduction that stems from dividing the marginal-per-capita-return by two. Our results stress the significance of having well-informed leaders

Keywords: voluntary contribution; information cascade; fundraising; sequential public good game; leadership (search for similar items in EconPapers)
JEL-codes: C92 D80 H41 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2020-10
New Economics Papers: this item is included in nep-exp and nep-gth
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Downloads: (external link)
http://mse.univ-paris1.fr/pub/mse/CES2020/20023.pdf (application/pdf)
https://halshs.archives-ouvertes.fr/halshs-02977853

Related works:
Working Paper: Voluntary contributions in cascades: The tragedy of ill-informed leadership (2020)
Working Paper: Voluntary contributions in cascades: The tragedy of ill-informed leadership (2020)
Working Paper: Voluntary contributions in cascades: The tragedy of ill-informed leadership (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:20023

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