Fool Me Once: An experiment on credibility and leadership

Cooper, David J., Hamman, John R. and Weber, Roberto A. (2020) Fool Me Once: An experiment on credibility and leadership. The Economic Journal, 130 (631). 2105–2133. ISSN 0013-0133

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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.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
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Depositing User: LivePure Connector
Date Deposited: 23 Apr 2020 08:52
Last Modified: 24 May 2022 13:56
DOI: 10.1093/ej/ueaa059

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