TY - JOUR
T1 - Diversity of Opinion and Financing of New Technologies
AU - Allen, Franklin
AU - Gale, Douglas
N1 - Funding Information:
⁄We thank Sudipto Bhattacharya, Richard Green, Eugene Kandel, Anjan Thakor, an anonymous referee, and participants at the ABN AMRO/JFI/Wharton Financial Institutions Center Symposium on the Design of Financial Systems and Markets, the Symposium on Financial Innovation and Technology at the University of Maryland, and seminars at New York University and the University of Pennsylvania for helpful comments and suggestions. We are grateful to the Wharton Financial Institutions Center and the NSF for financial support.
PY - 1999/1
Y1 - 1999/1
N2 - The objective of this paper is to compare the effectiveness of financial markets and financial intermediaries in financing new industries and technologies in the presence of diversity of opinion. In markets, investors become informed about the details of the new industry or technology and make their own investment decisions. In intermediaries, the investment decision is delegated to a manager, who is the only one who needs to become informed, which saves on information costs, but investors may anticipate disagreement with the manager and be unwilling to provide funds. Financial markets tend to be superior when there is significant diversity of opinion and information is inexpensive. Journal of Economic Literature Classification Numbers: G1, G2.
AB - The objective of this paper is to compare the effectiveness of financial markets and financial intermediaries in financing new industries and technologies in the presence of diversity of opinion. In markets, investors become informed about the details of the new industry or technology and make their own investment decisions. In intermediaries, the investment decision is delegated to a manager, who is the only one who needs to become informed, which saves on information costs, but investors may anticipate disagreement with the manager and be unwilling to provide funds. Financial markets tend to be superior when there is significant diversity of opinion and information is inexpensive. Journal of Economic Literature Classification Numbers: G1, G2.
UR - http://www.scopus.com/inward/record.url?scp=0142005569&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0142005569&partnerID=8YFLogxK
U2 - 10.1006/jfin.1999.0261
DO - 10.1006/jfin.1999.0261
M3 - Article
AN - SCOPUS:0142005569
SN - 1042-9573
VL - 8
SP - 68
EP - 89
JO - Journal of Financial Intermediation
JF - Journal of Financial Intermediation
IS - 1-2
ER -