Choosing Records
In conclusion, we show that the expected quality of an Agent conditional on a $d= (0,0) $ record is always above the expected quality of an untested agent. On the other hand, the expected quality associated with a record of $ (1,1) $ is below the expected quality of an untested agent for a large set of parameters. If we also assume that the Principal can only distinguish between a consistent record and a flip-flop record, then it is possible to show that a consistent record is always worse than a flip-flop record. Furthermore, if the Principal is risk averse, than a consistent record might be a real disaster since it is also associated with the highest conditional variance.
Year of publication: |
2009
|
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Authors: | Mattozzi, Andrea ; Iaryczower, Matias |
Institutions: | Society for Economic Dynamics - SED |
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