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The Wrong Kind of Information

Author

Listed:
  • Aditya Kuvalekar
  • João Ramos
  • Johannes Schneider

Abstract

Agents, some with a bias, decide between undertaking a risky project and a safe alternative based on information about the project's efficiency. Only a part of that information is verifiable. Unbiased agents want to undertake only efficient projects, while biased agents want to undertake any project. If the project causes harm, a court examines the verifiable information, forms a belief about the agent's type, and decides the punishment. Tension arises between deterring inefficient projects and a chilling effect on using the unverifiable information. Improving the unverifiable information always increases overall efficiency, but improving the verifiable information may reduce efficiency.

Suggested Citation

  • Aditya Kuvalekar & João Ramos & Johannes Schneider, 2022. "The Wrong Kind of Information," CRC TR 224 Discussion Paper Series crctr224_2022_357, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2022_357
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp357
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    More about this item

    Keywords

    deterrence; chilling effect; screening;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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