American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Investment and Information Acquisition
American Economic Journal: Microeconomics
vol. 14,
no. 3, August 2022
(pp. 480–529)
Abstract
We study the interaction between productive investment and persuasion activities in a principal–agent setting with strategic disclosure. In an attempt to persuade the principal, the agent diverts substantial resources from productive activities to information acquisition for persuasion, even though productive activities are more efficient and raise the chances of success in persuasion. The equilibrium outcomes of simultaneous and sequential allocation procedures are the same, because the value of learning and experimentation through information acquisition is dominated by the value of productive investment. We show that an increase in cost of an investment project leads to a lower productive investment.Citation
Migrow, Dimitri, and Sergei Severinov. 2022. "Investment and Information Acquisition." American Economic Journal: Microeconomics, 14 (3): 480–529. DOI: 10.1257/mic.20200115Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- D86 Economics of Contract: Theory
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
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