A regret theory of investment timing under asymmetric information

Kit Pong Wong

Managerial and Decision Economics, 2023, vol. 44, issue 3, 1669-1677

Abstract: This paper examines the optimal investment timing in a principal–agent model under asymmetric information. An owner has to delegate the investment decision of a project to a manager who privately knows the true quality of the project. Introducing regret aversion to the owner affects the equilibrium trade‐off between investment efficiency and information rent as compared to the standard model. When the project is more likely to be of high (low) quality, social loss is smaller (larger), the informed manager is made better (worse) off, and the uninformed owner is always made worse off when regret aversion prevails.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/mde.3774

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:44:y:2023:i:3:p:1669-1677

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().