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Fool me once: an experiment on credibility and leadership


Cooper, David J; Hamman, John R; Weber, Roberto A (2020). Fool me once: an experiment on credibility and leadership. Economic Journal, 130(631):2105-2133.

Abstract

We investigate ‘social credibility’, a leader’s ability to convince followers that conditions are favourable and that others will follow the leader's advice. To do so, we study an experimental joint venture with three key properties: returns are uncertain, investments are complements, and investment is often more beneficial for the leader than the followers. The leader has private information about investment returns and can facilitate coordination through cheap-talk recommendations. We find that leaders manage social credibility by forgoing potentially profitable advice to invest, increasing the likelihood that subsequent recommendations are followed. We identify factors that affect the persistence of social credibility.

Abstract

We investigate ‘social credibility’, a leader’s ability to convince followers that conditions are favourable and that others will follow the leader's advice. To do so, we study an experimental joint venture with three key properties: returns are uncertain, investments are complements, and investment is often more beneficial for the leader than the followers. The leader has private information about investment returns and can facilitate coordination through cheap-talk recommendations. We find that leaders manage social credibility by forgoing potentially profitable advice to invest, increasing the likelihood that subsequent recommendations are followed. We identify factors that affect the persistence of social credibility.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Economics and econometrics
Language:English
Date:October 2020
Deposited On:25 Jan 2021 14:39
Last Modified:31 Jan 2021 08:47
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0013-0133
OA Status:Closed
Publisher DOI:https://doi.org/10.1093/ej/ueaa059
Project Information:
  • : FunderSNSF
  • : Grant ID100018_140571
  • : Project TitleLeadership Across Economic Contexts

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