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Innovation and Information Acquisition Under Time Inconsistency and Uncertainty


  • Sophie Chemarin
  • Caroline Orset


We propose to analyse the hyperbolic discounting preferences effect on the innovator's research investment decision. Investing in research allows him to acquire information, and then to reduce the uncertainty of the risks of his project. We find that whatever the innovator's preferences, that is hyperbolic or time-consistent, there exists a research investment constraint that limits the information acquisition. However, even if the information is free, while a time-consistent agent always acquires information, a hyperbolic agent may prefer staying ignorant. We also emphasize that hyperbolic discounting preferences induce and information precision constraint that leads the hyperbolic innovator to ignore the information whilethe time-consistent innovator gets it. Moreover, the possibility that the agent has a commitment power in the future strengthens this ignorance strategy. Finally, we investigate the impact of existing liability rules on the innovator's decision to acquire information.

Suggested Citation

  • Sophie Chemarin & Caroline Orset, 2008. "Innovation and Information Acquisition Under Time Inconsistency and Uncertainty," Cahiers de recherche 0810, CIRPEE.
  • Handle: RePEc:lvl:lacicr:0810

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    References listed on IDEAS

    1. 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.
    2. Salanie, Francois & Treich, Nicolas, 2006. "Over-savings and hyperbolic discounting," European Economic Review, Elsevier, vol. 50(6), pages 1557-1570, August.
    3. Roland BĂ©nabou & Jean Tirole, 2002. "Self-Confidence and Personal Motivation," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 871-915.
    4. Juan D. Carrillo & Thomas Mariotti, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 529-544.
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    Cited by:

    1. Caroline Orset, 2017. "How do travellers respond to health and environmental policies to reduce air pollution?," Working Papers 2017/02, INRA, Economie Publique.

    More about this item


    Innovation; information acquisition; uncertainty; self-control; time inconsistency; liability rules;

    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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