Working Paper: CEPR ID: DP8531
Authors: Arthur Campbell; Florian Ederer; Johannes Spinnewijn
Abstract: We analyze costly information acquisition and information revelation in groups in a dynamic setting. Even when group members have perfectly aligned interests the group may inefficiently delay decisions. When deadlines are far away, uninformed group members freeride on each others' efforts to acquire information. When deadlines draw close, informed group members stop revealing their information in an attempt to incentivize other group members to continue searching for information. Surprisingly, setting a tighter deadline may increase the expected decision time and increase the expected accuracy of the decision in the unique equilibrium. As long as the deadline is set optimally, welfare is higher when information is only privately observable to the agent who obtained information rather than to the entire group.
Keywords: deadlines; group decisions; information disclosure; information search
JEL Codes: D71; D82; D83; H42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lack of timely information search (D83) | delays in decision-making (D91) |
| tight deadline (C41) | expected decision time (D79) |
| tight deadline (C41) | expected accuracy of the decision (C52) |
| far away deadlines (G14) | diminished motivation to search for information (D83) |
| private observability of information (D89) | higher welfare (I31) |
| information concealment (D82) | encourage others to search more actively (O36) |
| phases of low effort and full information disclosure (G14) | high effort and no information disclosure (D82) |