The Wisdom of the Crowd When Acquiring Information Is Costly

Jacob Glazer, Ilan Kremer, Motty Perry*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
Pages (from-to)6443-6456
Number of pages14
JournalManagement Science
Volume67
Issue number10
DOIs
StatePublished - Oct 2021

Keywords

  • Information processing , analytic modeling

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