Implemeting the ” Wisdom of the Crowd ” ∗

We study a novel mechanism design model in which agents arrive sequentially and each in turn chooses one action from a set of actions with unknown rewards. The information that becomes available affects the incentives of an agent to explore and generate new information. We characterize the optimal disclosure policy of a planner whose goal is to maximizes social welfare. One interpretation for our result is the implementation of what is known as the ’Wisdom of the crowds’. This topic has become more relevant during the last decade with the rapid adaptation of the Internet. ∗We wish to thank Michael Borns for his invaluable editorial work. †Ilan Kremer: Stanford University and the Hebrew University of Jerusalem, [email protected]. ‡Yishay Mansour: Tel Aviv University, [email protected]. This research was supported in part by the Google Inter-university center for Electronic Markets and Auctions, by The Israeli Centers of Research Excellence (I-CORE) program, (Center No. 4/11), by a grant from the Israel Science Foundation, by a grant from United States-Israel Binational Science Foundation (BSF), and by a grant from the Israeli Ministry of Science (MoS). §Motty Perry: University of Warwick and The Hebrew University of Jerusalem, [email protected].