Disclosure and Choice

Speaker
Eddie Dekel
Date
21/04/2015 - 12:30 - 11:00Add To Calendar 2015-04-21 11:00:00 2015-04-21 12:30:00 Disclosure and Choice Abstract: An agent chooses among projects with random outcomes. His payoff is increasing in the outcome and in an observer’s expectation of the outcome. With some probability, the agent can disclose the true outcome to the observer. We show that choice is inefficient: the agent favors riskier projects even with lower expected returns. If information can be disclosed by a challenger who prefers lower beliefs of the observer, the chosen project is excessively risky when the agent has better access to information, excessively risk-averse when the challenger has better access, and efficient otherwise. We also characterize the agent’s worst-case equilibrium payoff. Economics and Business Administration building (No. 504), room 011 אוניברסיטת בר-אילן - Department of Economics Economics.Dept@mail.biu.ac.il Asia/Jerusalem public
Place
Economics and Business Administration building (No. 504), room 011
Affiliation
Tel Aviv University
Abstract

Abstract: An agent chooses among projects with random outcomes. His payoff is increasing in the outcome and in an observer’s expectation of the outcome. With some probability, the agent can disclose the true outcome to the observer. We show that choice is inefficient: the agent favors riskier projects even with lower expected returns. If information can be disclosed by a challenger who prefers lower beliefs of the observer, the chosen project is excessively risky when the agent has better access to information, excessively risk-averse when the challenger has better access, and efficient otherwise. We also characterize the agent’s worst-case equilibrium payoff.

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Last Updated Date : 03/02/2015