Fool Me Once: An experiment on credibility and leadership

David J. Cooper, John R. Hamman, Roberto A. Weber

Research output: Contribution to journalArticle

3 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)2105–2133
Number of pages29
JournalThe Economic Journal
Volume130
Issue number631
Early online date8 May 2020
DOIs
Publication statusPublished - Oct 2020

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