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Vanity in Politics: A Problem?

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Author Info
Guido Suurmond () (University of Leiden)
Otto H. Swank () (Faculty of Economics, Erasmus University Rotterdam)
Bauke Visser () (Faculty of Economics, Erasmus University Rotterdam)

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Abstract

Can vanity do any good? It may seem obvious to answer this question in the negative, as economists have shown how reputational concerns lead agents e.g. to ignore valuable information, to herd, and to become overly risk averse. We explore how proud agents may be a social blessing. An agent may exert effort to become informed about the uncertain benefits of aproject. A smart agent's efforts make him better informed; a dumb agent's efforts are to no avail. If an agent does not know his type, pride is socially beneficial. If an agent knows his type, a dumb agent takes inefficient, unconventional decisions to mimick a smart agent. The latter exerts more effort in order not to be mistaken for a dumb. This holds whether or not project rejection is a save haven for the dumb.

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 02-123/1.

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Date of creation: 18 Dec 2002
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Handle: RePEc:dgr:uvatin:20020123

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Web page: http://www.tinbergen.nl/

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Related research
Keywords: Reputation Information Collection

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

References listed on IDEAS
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  1. Effinger, Matthias R. & Polborn, Mattias K., 2001. "Herding and anti-herding: A model of reputational differentiation," European Economic Review, Elsevier, vol. 45(3), pages 385-403, March. [Downloadable!] (restricted)
  2. Persson, Torsten & Tabellini, Guido, 1997. "Political Economics and Macroeconomic Policy," CEPR Discussion Papers 1759, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Milbourn, Todd T & Shockley, Richard L & Thakor, Anjan V, 2001. "Managerial Career Concerns and Investments in Information," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 334-51, Summer.
  6. Biglaiser, Gary & Mezzetti, Claudio, 1997. "Politicians' decision making with re-election concerns," Journal of Public Economics, Elsevier, vol. 66(3), pages 425-447, December. [Downloadable!] (restricted)
  7. Avery, Christopher N. & Chevalier, Judith A., 1999. "Herding over the career," Economics Letters, Elsevier, vol. 63(3), pages 327-333, June. [Downloadable!] (restricted)
  8. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Blackwell Publishing, vol. 66(1), pages 169-82, January. [Downloadable!] (restricted)
  9. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-79, June.
    Other versions:
    • Scharfstein, David. & Stein, Jeremy C. & Sloan School of Management., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  10. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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