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Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning

  • Prendergast, Canice
  • Stole, Lars

This paper examines individual decision making when decisions reflect on people's ability to learn. The authors address this problem in the context of a manager making investment decisions on a project over time. They show that, in an effort to appear as a fast learner, the manager will exaggerate his own information but ultimately he becomes too conservative, being unwilling to change his investments on the basis of new information. The authors' results arise purely from learning about competence rather than concavity or convexity of the rewards functions. They relate their results to the existing psychology literature concerning cognitive dissonance reduction. Copyright 1996 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/262055
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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 104 (1996)
Issue (Month): 6 (December)
Pages: 1105-34

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Handle: RePEc:ucp:jpolec:v:104:y:1996:i:6:p:1105-34
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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  1. Bengt Holmstrom & Joan Ricart i Costa, 1986. "Managerial Incentives and Capital Management," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 835-860.
  2. Berg, J. & Dickhaut, J.W. & Kanodia, C., 1991. "The Role of Private Information in the Sunk Cost Phenomenon," Papers 166, Washington St. Louis - School of Business and Political Economy.
  3. Boot, Arnoud W A, 1992. " Why Hang on to Losers? Divestitures and Takeovers," Journal of Finance, American Finance Association, vol. 47(4), pages 1401-23, September.
  4. Owen Lamont, 1995. "Macroeconomics Forecasts and Microeconomic Forecasters," NBER Working Papers 5284, National Bureau of Economic Research, Inc.
  5. Gibbons, R. & Murphy, K.J., 1990. "Optimal Incentive Contracts In The Presence Of Career Concerns: Theory And Evidence," Working papers 563, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Lok-sang, Ho, 1987. "Long Run Equilibrium and Macroeconomic Policy," Departmental Working Papers _003, Chinese University of Hong Kong, Department of Economics.
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  8. De Bondt, Werner F M & Thaler, Richard H, 1987. " Further Evidence on Investor Overreaction and Stock Market Seasonalit y," Journal of Finance, American Finance Association, vol. 42(3), pages 557-81, July.
  9. N/A, 1987. "Chaptefi III. the British Economy Since 1979," National Institute Economic Review, National Institute of Economic and Social Research, vol. 122(1), pages 41-46, November.
  10. N/A, 1987. "Calendar of Main Economic Events, 1986," National Institute Economic Review, National Institute of Economic and Social Research, vol. 119(1), pages 79-93, February.
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  13. Zwiebel, Jeffrey, 1995. "Corporate Conservatism and Relative Compensation," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 1-25, February.
  14. -, 1992. "Forecasting tourist arrivals in the Caribbean," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 27346, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  15. Anonymous, 1992. "Economic forecasts overview and summary table," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 55, December.
  16. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
  17. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
  18. Ng, Yew-Kwang, 1987. "The Role of Economists and Third-Best Policies," Public Finance = Finances publiques, , vol. 42(1), pages 152-55.
  19. -, 1987. "Evolución de la economía brasileña," Informe Estadístico – Oficina de la CEPAL en Brasilia 27977, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  20. N/A, 1987. "Chapter I. the Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 122(1), pages 7-23, November.
  21. N/A, 1987. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 120(1), pages 6-20, May.
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