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Investment and Information Acquisition

Author

Listed:
  • Dimitri Migrow
  • Sergei Severinov

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.

Suggested Citation

  • Dimitri Migrow & Sergei Severinov, 2022. "Investment and Information Acquisition," American Economic Journal: Microeconomics, American Economic Association, vol. 14(3), pages 480-529, August.
    • Handle: RePEc:aea:aejmic:v:14:y:2022:i:3:p:480-529
    DOI: 10.1257/mic.20200115
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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