We analyze a principal-agent setting with multiple sources of contracting information in which the signal from each source can be unmistakably interpreted as “good” or “bad” news. We then ask whether it is best to condition the acquisition of one of the information sources on whether the earlier reporting source has reported “good” or “bad” news. That is, is it efficient to “chase the good news” or to “chase the bad news”? The answer depends on whether the earlier source is publicly observed or self-reported by the agent. We also explore ties to institutional features, and in particular conservative accounting treatments.
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Volume (Year): 56 (2004) Issue (Month): 3 (July) Pages: 206-222 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information M4 - Business Administration and Business Economics; Marketing; Accounting - - Accounting M55 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Contracting Devices
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