Sequential Decisions with Tests.
We consider a principal-agent problem where the principal wishes to be endorsed by a sequence of agents, but cannot truthfully reveal type. In the standard "herding" model, the agents learn from each other’s decisions, which can lead to cascades on a given decision when later agents’ priva...
| Main Authors: | , |
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| Format: | Working paper |
| Language: | English |
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Department of Economics (University of Oxford)
2005
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| _version_ | 1826299220117684224 |
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| author | Gill, D Sgroi, D |
| author_facet | Gill, D Sgroi, D |
| author_sort | Gill, D |
| collection | OXFORD |
| description | We consider a principal-agent problem where the principal wishes to be endorsed by a sequence of agents, but cannot truthfully reveal type. In the standard "herding" model, the agents learn from each other’s decisions, which can lead to cascades on a given decision when later agents’ private information is swamped. We augment the standard model to allow the principal to subject herself to a test designed to provide public information about her type. She must decide how tough a test to attempt from a continuum of test types, which involves trading off the higher probability of passing an easier test against the greater impact from passing a tougher test. We find that the principal will always choose to be tested, and will prefer a tough test to a neutral or easy one. |
| first_indexed | 2024-03-07T04:58:36Z |
| format | Working paper |
| id | oxford-uuid:d778a7c9-e578-474d-9e37-6c37fac58ecd |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T04:58:36Z |
| publishDate | 2005 |
| publisher | Department of Economics (University of Oxford) |
| record_format | dspace |
| spelling | oxford-uuid:d778a7c9-e578-474d-9e37-6c37fac58ecd2022-03-27T08:41:19ZSequential Decisions with Tests.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:d778a7c9-e578-474d-9e37-6c37fac58ecdEnglishOxford University Research Archive - ValetDepartment of Economics (University of Oxford)2005Gill, DSgroi, DWe consider a principal-agent problem where the principal wishes to be endorsed by a sequence of agents, but cannot truthfully reveal type. In the standard "herding" model, the agents learn from each other’s decisions, which can lead to cascades on a given decision when later agents’ private information is swamped. We augment the standard model to allow the principal to subject herself to a test designed to provide public information about her type. She must decide how tough a test to attempt from a continuum of test types, which involves trading off the higher probability of passing an easier test against the greater impact from passing a tougher test. We find that the principal will always choose to be tested, and will prefer a tough test to a neutral or easy one. |
| spellingShingle | Gill, D Sgroi, D Sequential Decisions with Tests. |
| title | Sequential Decisions with Tests. |
| title_full | Sequential Decisions with Tests. |
| title_fullStr | Sequential Decisions with Tests. |
| title_full_unstemmed | Sequential Decisions with Tests. |
| title_short | Sequential Decisions with Tests. |
| title_sort | sequential decisions with tests |
| work_keys_str_mv | AT gilld sequentialdecisionswithtests AT sgroid sequentialdecisionswithtests |