Learning More by Doing Less
A principal must decide whether to implement each of two independent proposals (e.g., earmark requests, policy reforms, grant funding) of unknown quality. Each proposal is represented by an agent who advocates by producing evidence about quality. Although the principal prefers the most-informative evidence, agents strategically choose less-informative evidence to maximize the probability the principal implements their proposals. In this setting, we show how limited capacity (i.e., the ability of the principal to implement at most one of the two proposals) can motivate agents to produce more-informative evidence in an effort to convince the principal that their proposal is better than the alternative. We derive reasonable conditions under which the principal prefers limited capacity to unlimited capacity.
|Date of creation:||2011|
|Publication status:||Forthcoming: Working|
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Web page: http://www.bus.miami.edu/faculty-and-research/academic-departments/economics/index.html
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