Working Paper: CEPR ID: DP4907
Authors: Isabelle Brocas; Juan D. Carrillo
Abstract: We analyse an agency model where one individual decides how much evidence he collects. We assume that he has free access to information, but all the news acquired becomes automatically public. Conditional on the information disclosed, a second individual with conflicting preferences undertakes an action that affects the payoff of both agents. In this game of incomplete but symmetric information, we show that the first individual obtains rents due to his superior ability to decide whether to collect or forego evidence, i.e., due to his control in the generation of (public) information. We provide an analytical characterization of these rents, that we label ?rents of public ignorance?. They can be interpreted as, for example, the degree of influence that a chairman can exert on a committee due exclusively to his capacity to decide whether to keep discussions alive or terminate them and call a vote. Last, we show that similar insights are obtained if the agent decides first how much private information he collects and then how much of this information he transmits to the other agent.
Keywords: experimentation; incomplete and symmetric information; information control; informational rents; learning; optimal stopping rule; principal-agent; public ignorance
JEL Codes: D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Leader's information control (D83) | Decisionmaker's actions (D79) |
| Leader's ability to control information flow (D83) | Leader derives rents (D33) |
| Leader's decision to collect information (D70) | Decisionmaker's beliefs (D91) |
| Decisionmaker's beliefs (D91) | Decisionmaker's actions (D79) |
| Leader's control over timing and quantity of information (D83) | Strategic advantage for Leader (L21) |
| Congruence of preferences between Leader and Decisionmaker (D79) | Leader's influence (M54) |
| Decisionmaker's cost of acquiring information (D80) | Rents derived from information control (D89) |