Abstract: Two players use the same learning technology to examine sequentially and privately the unknown quality of a project. Launching the project requires mutual consent; however, the first player has more at stake than the second player. Because of private learning there are moral hazard problems. For moderate priors about the quality of the project, in the Pareto efficient equilibrium of the game, the first player occasionally makes false claims about positive findings and  players' beliefs diverge from each other.  Although the first player gradually regains the second player's trust, the collaboration is inefficient: on one hand, projects may be discarded even when the first player knows of its good quality, and, on the other hand, projects may be adopted even when learning produced no positive evidence.  For non-moderate priors,  the first player behaves honestly but the sequential collaboration reduces to one in which only one player acts as decision maker.

Daniel Bird
Tel-Aviv University
joint with Yair Antler and Santiago Oliveros
Elath Hall, 2nd floor, Feldman Building, Edmond J. Safra Campus
Sunday, March 17, 2019 - 13:30 to 16:00
Academic year: 
2 019