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Innovation and Information Acquisition Under Time Inconsistency and Uncertainty

Sophie Chemarin and Caroline Orset

Cahiers de recherche from CIRPEE

Abstract: We propose to analyse the hyperbolic discounting preferences effect on the innovator's research investment decision. Investing in research allows him to acquire information, and then to reduce the uncertainty of the risks of his project. We find that whatever the innovator's preferences, that is hyperbolic or time-consistent, there exists a research investment constraint that limits the information acquisition. However, even if the information is free, while a time-consistent agent always acquires information, a hyperbolic agent may prefer staying ignorant. We also emphasize that hyperbolic discounting preferences induce and information precision constraint that leads the hyperbolic innovator to ignore the information whilethe time-consistent innovator gets it. Moreover, the possibility that the agent has a commitment power in the future strengthens this ignorance strategy. Finally, we investigate the impact of existing liability rules on the innovator's decision to acquire information.

Keywords: Innovation; information acquisition; uncertainty; self-control; time inconsistency; liability rules (search for similar items in EconPapers)
JEL-codes: D81 D83 D92 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-ino, nep-knm and nep-upt
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http://www.cirpee.org/fileadmin/documents/Cahiers_2008/CIRPEE08-10.pdf (application/pdf)

Related works:
Journal Article: Innovation and Information Acquisition under Time Inconsistency and Uncertainty (2011) Downloads
Working Paper: Innovation and information acquisition under time inconsistency and uncertainty (2011) Downloads
Working Paper: Innovation and information acquisition under time inconsistency and uncertainty (2008) Downloads
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