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Innovation and information acquisition under time inconsistency and uncertainty

Author

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  • Sophie Chemarin

    (CECO - Laboratoire d'économétrie de l'École polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Caroline Orset

    (LERNA - Economie des Ressources Naturelles - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - INRA - Institut National de la Recherche Agronomique - CEA - Commissariat à l'énergie atomique et aux énergies alternatives)

Abstract

This paper analyzes the impact of hyperbolic discounting preferences on theagent's information acquisition decision who wants to undertake a potentialdangerous activity for human health or the environment. We find that belowcertain discount rate threshold, an agent prefers ignoring information andcontinuing his project. On the other hand, above this threshold, it is optimal forhim to acquire information, and the investment for acquiring the information isincreasing with the discount rate. We then conclude that hyperbolic discountingpreferences limit the information acquisition. Moreover, we explain that the lackof self-control induced by hyperbolic discounting preferences also restraints theinformation acquisition. Finally, we analyze the efficiency of the strict liabilityrule and the negligence rule to motivate the agent to acquire information.

Suggested Citation

  • Sophie Chemarin & Caroline Orset, 2008. "Innovation and information acquisition under time inconsistency and uncertainty," Working Papers halshs-00226656, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00226656
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00226656v1
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    References listed on IDEAS

    as
    1. Brocas, Isabelle & Carrillo, Juan D., 2005. "A theory of haste," Journal of Economic Behavior & Organization, Elsevier, vol. 56(1), pages 1-23, January.
    2. Salanie, Francois & Treich, Nicolas, 2006. "Over-savings and hyperbolic discounting," European Economic Review, Elsevier, vol. 50(6), pages 1557-1570, August.
    3. Roland Bénabou & Jean Tirole, 2005. "Self-Confidence and Personal Motivation," International Economic Association Series, in: Bina Agarwal & Alessandro Vercelli (ed.), Psychology, Rationality and Economic Behaviour, chapter 2, pages 19-57, Palgrave Macmillan.
    4. Juan D. Carrillo & Thomas Mariotti, 2000. "Strategic Ignorance as a Self-Disciplining Device," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 529-544.
    5. Brocas, Isabelle & Carrillo, Juan D., 2000. "The value of information when preferences are dynamically inconsistent," European Economic Review, Elsevier, vol. 44(4-6), pages 1104-1115, May.
    6. Read, Daniel, 2001. "Is Time-Discounting Hyperbolic or Subadditive?," Journal of Risk and Uncertainty, Springer, vol. 23(1), pages 5-32, July.
    7. Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-1012, December.
    8. Isabelle Brocas & Juan D. Carrillo, 2004. "Entrepreneurial Boldness and Excessive Investment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(2), pages 321-350, June.
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    Cited by:

    1. Orset, Caroline, 2019. "How Do Travellers Respond to Health and Environmental Policies to Reduce Air Pollution?," Ecological Economics, Elsevier, vol. 156(C), pages 68-82.
    2. Julien Jacob & Caroline Orset, 2020. "Innovation, information, lobby and tort law under uncertainty," Working Papers of BETA 2020-25, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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    More about this item

    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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