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.

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doi.org/10.1016/j.jebo.2005.11.003, hdl.handle.net/1765/11731
Journal of Economic Behavior & Organization
Erasmus School of Economics

Visser, B., & Swank, O. (2008). The consequences of endogenizing information for the performance of a sequential decision procedure. Journal of Economic Behavior & Organization, 65(3-4), 667–681. doi:10.1016/j.jebo.2005.11.003