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Career Concerns and Policy Intransigence - A Dynamic Signalling Model

Caroline Thomas ()

No 161228, Department of Economics Working Papers from The University of Texas at Austin, Department of Economics

Abstract: A decision-maker might be reluctant to abandon her project when she is concerned both about social welfare and public beliefs about her ability. The decision-maker gets private information over time about whether the project will succeed or fail. Intuition suggests that in this setting the decision-maker will continue with the project for too long, both because persisting signals positive private information and in the hope of a last-minute success. I show, however, that efficiency can be achieved in equilibrium for many information structures. Surprisingly, increasing the informational asymmetry by improving the decision-maker's private information improves efficiency.Creation-Date: 2014-2

JEL-codes: C73 D82 P16 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-mic
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