Motivating Agents to Acquire Information

Economics

Speaker:	Charles Angelucci
Date:	Wednesday 3 December 2014
Time:	14.00 - 15.30
Location:	Matrix Lecture Theatre, Building One

Further details

It is difficult to motivate advisors to acquire information through standard performance-contracts when for instance outcomes are uncertain and/or only observed in the distant future. Decision-makers may however exploit advisors' desire to influence the outcome. To investigate this, I build a model in which a decision-maker and two advisors intrinsically care about the decision's consequences, which depend on an unknown state of the world. To reduce uncertainty, the advisors can produce (costly) information of low or high accuracy; this information becomes public but the decision-maker cannot assess its accuracy with certainty, and monetary transfers are moreover unavailable. I show that, when the decision-maker can pre-commit to a decision-rule, he should behave as if the jointly provided information is more accurate than it actually is, and thus grant excessive importance to the produced information