Abstract

http://ssrn.com/abstract=2042374
 
 

References (24)



 
 

Footnotes (12)



 


 



Biased Information and Effort


Julie Rosaz


French National Center for Scientific Research (CNRS), Laboratoire d'Economie Théorique et Appliquée (LAMETA)

April 2012

Economic Inquiry, Vol. 50, Issue 2, pp. 484-501, 2012

Abstract:     
We study the impact of information manipulation by a principal on the agent's effort. In a context of asymmetric information at the principal's advantage, we test experimentally the principal's willingness to bias (overestimate or underestimate) the information she/he gives to her/his agent on her/his ability in order to motivate her/him to exert more effort. We find that (1) principals do bias information, and (2) agents trust the cheap‐talk messages they receive and adjust their effort accordingly. Therefore, biased messages improve both the agent's performance and thus the principal's profit. This, however, does not increase efficiency. We also find that overestimation occurs much more often than underestimation. Making the signal costly in an additional treatment reduces this effect.

Number of Pages in PDF File: 18

JEL Classification: D83, C92, M12

Accepted Paper Series





Date posted: April 19, 2012  

Suggested Citation

Rosaz, Julie, Biased Information and Effort (April 2012). Economic Inquiry, Vol. 50, Issue 2, pp. 484-501, 2012. Available at SSRN: http://ssrn.com/abstract=2042374 or http://dx.doi.org/10.1111/j.1465-7295.2010.00361.x

Contact Information

Julie Rosaz (Contact Author)
French National Center for Scientific Research (CNRS), Laboratoire d'Economie Théorique et Appliquée (LAMETA) ( email )
France
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References:  24
Footnotes:  12

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