The consequences of endogenizing information for the performance of a sequential decision procedure
March 2008
Article
volume 65, issue 3-4 pp 667-681.
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We analyse the implications of endogenizing information collection and reputational concerns for the performance of a sequential decision structure. In this model, two agents decide in a sequence whether to implement a public project. The cost of gathering information is private. We derive two results. First, endogenizing information replaces the herding problem with a free-rider problem. Second, endogenizing information aggravates the distortionary effect of reputational concerns.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- D72 : Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior
- D82 : Asymmetric and Private Information
Automatically Extracted Terms
- agent
- agent 2
- agent 1
- project
- signal
- decision
- information
- assumption
- reputation
- lemma
- sequential decision procedure
- reputational concerns
- probability
- model
- agent 2.
- result
- project payo
- 1 2
- sequential
- concern
