Choosing Records

Andrea Mattozzi and Matias Iaryczower
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Matias Iaryczower: Caltech

No 886, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: In conclusion, we show that the expected quality of an Agent conditional on a $d= (0,0) $ record is always above the expected quality of an untested agent. On the other hand, the expected quality associated with a record of $ (1,1) $ is below the expected quality of an untested agent for a large set of parameters. If we also assume that the Principal can only distinguish between a consistent record and a flip-flop record, then it is possible to show that a consistent record is always worse than a flip-flop record. Furthermore, if the Principal is risk averse, than a consistent record might be a real disaster since it is also associated with the highest conditional variance.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed009:886

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