Information Cascades and Threshold Implementation
UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance
Topic: Information Cascades and Threshold Implementation
Speaker: Yizhou Xiao, Chinese University of Hong Kong
Abstract: Economic activities such as crowdfunding often involve sequential interactions, observational learning, and project implementation contingent on achieving certain thresholds of support. We incorporate endogenous all-or-nothing thresholds in a classic model of information cascade. We find that early supporters tap the wisdom of a later “gate-keeper” and effectively delegate their decisions, leading to uni-directional cascades and preventing agents’ herding on rejections. Consequently, entrepreneurs or project proposers can charge supporters higher fees, and proposal feasibility, project selection, and information production all improve, even when agents have the option to wait. Novel to the literature, equilibrium outcomes depend on the crowd size, and in the limit, efficient project implementation and full information aggregation ensue.
Date: Wednesday, 18 September 2019
Time: 12.00 – 1.00 p.m.
Venue: University of Technology, Sydney
Building 8, Room 08.002, Dr Chau Chak Wing Building
Dr Chau Chak Wing Building
14 - 28 Ultimo Road, Ultimo
Co-ordinator: Claire Liu (Ph: +61 2 9514 7748)
Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)