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Convictions versus Conviction Rates: The Prosecutor’s Choice

Eric Rasmusen (), Manu Raghav () and John Ramseyer ()

No 2008-16, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: Is it better to move first, or second— to innovate, or to imitate? We look at this in a context with both asymmetric information and payoff externalities. Suppose two players, one with superior information about market quality, consider entering one of two new markets immediately or waiting until the last possible date. We show that the more accurate the informed player’s information, the more he wants to delay to keep his information private. The less-informed player also wants to delay, but in order to learn. The less accurate the informed player’s information, the more both players want to move first to foreclose a market. More accurate information can lead to inefficiency by increasing the players’ incentive to delay. Thus, a moderate delay cost can increase industry profits.

Date: 2008-12
New Economics Papers: this item is included in nep-cta and nep-law
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