Information Cascades and Threshold Implementation: Theory and An Application to Crowdfunding

Lin Cong and Yizhou Xiao

No 30820, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Economic interactions, such as crowdfunding, often involve sequential actions, observational learning, and contingent project implementation. We incorporate all-or-nothing thresholds in a canonical model of information cascades. Early supporters effectively delegate their decisions to a "gatekeeper," resulting in uni-directional cascades without herding on rejections. Project proposers consequently can charge higher prices. Proposal feasibility, project selection, and information aggregation all improve, even when agents can wait. Equilibrium outcomes depend on the crowd size, and project implementation and information aggregation achieve efficiency in the large-crowd limit. Our key insights remain robust under thresholds in dollar amounts, alternative equilibrium selection, among other model extensions.

JEL-codes: D81 D83 G12 G14 (search for similar items in EconPapers)
Date: 2023-01
New Economics Papers: this item is included in nep-cta, nep-gth, nep-mic and nep-ppm
Note: AP CF PR
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published as LIN WILLIAM CONG & YIZHOU XIAO, 2024. "Information Cascades and Threshold Implementation: Theory and an Application to Crowdfunding," The Journal of Finance, vol 79(1), pages 579-629.

Downloads: (external link)
http://www.nber.org/papers/w30820.pdf (application/pdf)

Related works:
Journal Article: Information Cascades and Threshold Implementation: Theory and an Application to Crowdfunding (2024)
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:nbr:nberwo:30820

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30820

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().