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Scheduling Informational Activities and the Preference for Early Information in Deci-sion and Control Problems

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  • Anne Chwolka

Abstract

In this paper, I compare the values of different information systems for a principal in a two-stage production process, in which the principal himself is responsible for the production in the second stage. The available systems are all costless and differ only as to the moment in which information is released. This situation induces a potential tradeoff, because predecision information allows both the principal and agent to ensure a given probability of success with smaller amounts of effort. However, it can also make it costlier for the principal to commit to a prespecified effort level. Thus, delaying information release might be of value. I discuss the implications for the design of information systems and the possibilities for improvement, which also include the mode of delegation and the communication structure.

Suggested Citation

  • Anne Chwolka, 2005. "Scheduling Informational Activities and the Preference for Early Information in Deci-sion and Control Problems," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 57(1), pages 55-79, January.
  • Handle: RePEc:sbr:abstra:v:57:y:2005:i:1:p:55-79
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    Keywords

    Double Moral Hazard; Timing of Information Release; Value of Information;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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