Movers and Shakers Robert Akerlof and Richard Holden∗ June 1, 2015 Abstract Most projects, in most walks of life, require the participation of multiple parties. While it is difficult to unite individuals in a common endeavor, some people, whom we call “movers and shakers,” seem able to do it. The paper specifically examines moving and shaking of an investment project. We analyze a model with a large number of ex ante identical agents. Agents form social connections, bid to buy own- ership and cashflow rights to an asset that is necessary for undertaking a project, and acquire private iid signals of the project’s quality, which they can communicate, at a cost, to those with whom they are linked. Finally, agents choose whether to invest in the project whose returns are a function both of its underlying quality and aggregate investment. We characterize the equilibrium of this game, including the endogenously formed network structure, information flows, and payoffs. We show that a single agent emerges as most connected; these connections confer the ability to increase aggregate investment (i.e., ”move and shake” the project); he consequently earns a rent. In extensions, we move away from the assumption of ex ante identical agents to highlight various forces that lead one agent or another to become a mover and shaker. Finally, we explore various applications, including: entrepreneurship, funds management, and anchor investors. ∗Akerlof: University of Warwick. email:
[email protected]. Holden: UNSW Australia Business School. email:
[email protected]. We are grateful to Wouter Dessein, Bob Gibbons, Oliver Hart, Bengt Holmstrom, Rachel Kranton, Hongyi Li, Michael Powell and especially Andrea Prat for help- ful discussions, and to seminar participants at the Spring 2015 NBER Organizational Economics meetings, MIT, LMU Munich, Oxford University, Paris 2e, and UNSW.