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Information Search and Revelation in Groups

  • Johannes Spinnewijn

    (LSE)

  • Florian Ederer

    (UCLA)

  • Arthur Campbell

    (Yale)

We analyze costly information acquisition and information revelation in groups that evaluate different decision options in a dynamic setting. Even when team members have perfectly aligned interests the group may inefficiently delay decisions due to either insufficient information acquisition effort or due to the unwillingness of informed team members to reveal their information in an attempt to incentivize their co-workers to continue searching for information. Although deadlines can reduce costly delay, we show that, surprisingly, expected decision time is non-monotonic in the length of the deadline. The optimal deadline is unique and finite and incentivizes team members to intensely search for information while at same time minimizing any unnecessary delay in decision-making. As long as the deadline is set optimally, welfare is higher when information is only privately observable to the agent who obtained rather than to the entire group. We further explore how contracts, monitoring and third-party information intermediaries influence the actions of the group members.

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File URL: https://economicdynamics.org/meetpapers/2011/paper_997.pdf
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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 997.

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Date of creation: 2011
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Handle: RePEc:red:sed011:997
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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