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Research and the Approval Process: the Organization of Persuasion

Author

Listed:
  • Emeric Henry

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research)

  • Marco Ottaviani

    (Bocconi University [Milan, Italy])

Abstract

An informer sequentially collects and disseminates information through costly research to persuade an evaluator to approve an activity. Payoffs and control rights are split between informer and evaluator depending on the organizational rules governing the approval process. The welfare benchmark corresponds to Wald's classic solution for a statistician with payoff equal to the sum of informer and evaluator. Organizations with different commitment power of informer and evaluator are compared from a positive and normative perspective. Granting authority to the informer is socially optimal when information acquisition is sufficiently costly. The analysis is applied to the regulatory process for drug approval.

Suggested Citation

  • Emeric Henry & Marco Ottaviani, 2019. "Research and the Approval Process: the Organization of Persuasion," Post-Print hal-03391894, HAL.
    • Handle: RePEc:hal:journl:hal-03391894
    DOI: 10.1257/aer.20171919
    as

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    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation

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