American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Sequential Learning
American Economic Journal: Microeconomics
vol. 15,
no. 1, February 2023
(pp. 399–433)
Abstract
We develop a model in which two players sequentially and publicly examine a project. In our model the player who moves first can fabricate evidence to influence the second mover, which creates a moral hazard problem. We find that early strategic uncertainty can mitigate this problem. In particular, for intermediate prior beliefs about the project's quality, the Pareto-dominant equilibrium is in mixed strategies and consists of an early stage in which evidence may be fabricated and a later stage in which evidence is always authentic. Our findings shed light on the dynamics of R&D, quality assurance, and drug approval.Citation
Antler, Yair, Daniel Bird, and Santiago Oliveros. 2023. "Sequential Learning." American Economic Journal: Microeconomics, 15 (1): 399–433. DOI: 10.1257/mic.20200352Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L15 Information and Product Quality; Standardization and Compatibility
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