Investment and Information Acquisition

Dimitri Migrow and Sergei Severinov

American Economic Journal: Microeconomics, 2022, vol. 14, issue 3, 480-529

Abstract: We study the interaction between productive investment and persuasion activities in a principal–agent setting with strategic disclosure. In an attempt to persuade the principal, the agent diverts substantial resources from productive activities to information acquisition for persuasion, even though productive activities are more efficient and raise the chances of success in persuasion. The equilibrium outcomes of simultaneous and sequential allocation procedures are the same, because the value of learning and experimentation through information acquisition is dominated by the value of productive investment. We show that an increase in cost of an investment project leads to a lower productive investment.

JEL-codes: D21 D82 D83 D86 G31 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1257/mic.20200115

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