Innovation and Information Acquisition Under Time Inconsistency and Uncertainty
AbstractWe propose to analyse the hyperbolic discounting preferences effect on the innovator's research investment decision. Investing in research allows him to acquire information, and then to reduce the uncertainty of the risks of his project. We find that whatever the innovator's preferences, that is hyperbolic or time-consistent, there exists a research investment constraint that limits the information acquisition. However, even if the information is free, while a time-consistent agent always acquires information, a hyperbolic agent may prefer staying ignorant. We also emphasize that hyperbolic discounting preferences induce and information precision constraint that leads the hyperbolic innovator to ignore the information whilethe time-consistent innovator gets it. Moreover, the possibility that the agent has a commitment power in the future strengthens this ignorance strategy. Finally, we investigate the impact of existing liability rules on the innovator's decision to acquire information.
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Bibliographic InfoPaper provided by CIRPEE in its series Cahiers de recherche with number 0810.
Date of creation: 2008
Date of revision:
Innovation; information acquisition; uncertainty; self-control; time inconsistency; liability rules;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-14 (All new papers)
- NEP-INO-2008-07-14 (Innovation)
- NEP-KNM-2008-07-14 (Knowledge Management & Knowledge Economy)
- NEP-UPT-2008-07-14 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 529-44, July.
- Roland Bénabou & Jean Tirole, 2002. "Self-Confidence And Personal Motivation," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 871-915, August.
- Salanie, Francois & Treich, Nicolas, 2006. "Over-savings and hyperbolic discounting," European Economic Review, Elsevier, vol. 50(6), pages 1557-1570, August.
- Brocas, Isabelle & Carrillo, Juan D., 2000. "The value of information when preferences are dynamically inconsistent," European Economic Review, Elsevier, vol. 44(4-6), pages 1104-1115, May.
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