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The consequences of endogenizing information for the performance of a sequential decision procedure

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  • Swank, Otto
  • Visser, Bauke

Abstract

We analyse the implications of endogenizing information collection and reputational concerns for the performance of a sequential decision structure. In this model, two agents decide in a sequence whether to implement a public project. The cost of gathering information is private. We derive two results. First, endogenizing information replaces the herding problem with a free-rider problem. Second, endogenizing information aggravates the distortionary effect of reputational concerns.

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  • Swank, Otto & Visser, Bauke, 2008. "The consequences of endogenizing information for the performance of a sequential decision procedure," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 667-681, March.
    • Handle: RePEc:eee:jeborg:v:65:y:2008:i:3-4:p:667-681
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    Cited by:

    1. Balcilar, Mehmet & Demirer, Rıza & Hammoudeh, Shawkat, 2013. "Investor herds and regime-switching: Evidence from Gulf Arab stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 295-321.
    2. Bar-Isaac Heski, 2012. "Transparency, Career Concerns, and Incentives for Acquiring Expertise," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-15, January.
    3. Demirer, Rıza & Lee, Hsiang-Tai & Lien, Donald, 2015. "Does the stock market drive herd behavior in commodity futures markets?," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 32-44.
    4. Yoon, Young-Ro, 2015. "Strategic behavior in acquiring and revealing costly private information," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 133-148.
    5. Dingyu Zhang & Nadia Bhuiyan & Linghua Kong, 2018. "An Analysis of Organizational Structure in Process Variation," Organization Science, INFORMS, vol. 29(4), pages 722-738, August.
    6. Elisabeth Schulte & Mike Felgenhauer, 2017. "Preselection and expert advice," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(3), pages 693-714, August.
    7. Muskan Sachdeva & Ritu Lehal & Sanjay Gupta & Aashish Garg, 2021. "What make investors herd while investing in the Indian stock market? A hybrid approach," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 15(1), pages 19-37, September.
    8. Demirer, Riza & Kutan, Ali M. & Chen, Chun-Da, 2010. "Do investors herd in emerging stock markets?: Evidence from the Taiwanese market," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 283-295, November.
    9. Moatemri Ouarda & Abdelfatteh El Bouri & Olivero Bernard, 2013. "Herding Behavior under Markets Condition: Empirical Evidence on the European Financial Markets," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 214-228.

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