[JMC] Social learning and threshold in collective investment decisions: an experimental study

Cristina Martínez-Gómez
Cristina Martínez is PhD candidate in Economics at the University of Jaén where she is member of the UjaEconLab research team. Her academic background involves a Master’s degree in Business Administration, complemented by several courses in Behavioural Economics and a research stay in the experimental finance group at Radboud University. Her research focuses on Behavioural Finance and group decision-making, with a special interest in the experimental analysis of collective investment decisions.
Abstract: This research studies experimentally the impact of a threshold, a minimum funding requirement, for undertaking an uncertain collective project. The laboratory experiment includes four treatments: one with no threshold and three with different threshold levels. The strategic setting involves a group of investors who make sequentially decisions based on private information and history of their predecessors’ actions. The results show that the threshold and different threshold levels affect market efficiency. Moreover, in the threshold treatments, we find strong evidence that forward-looking beliefs about subjects’ subsequent actions are crucial in explaining individual investment decisions.

Keywords: Threshold; Social information; Information cascades; Collective decisions