Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning

JOURNAL OF POLITICAL ECONOMY, Vol. 104, No. 6, December 1996

Posted: 11 Nov 1996  

Canice Prendergast

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Lars Stole

University of Chicago - Booth School of Business

Abstract

This paper examines individual decision making when decisions reflect on people's ability to learn. We address this problem in the context of a manager making investment decisions on a project over time. We show that in an effort to appear as a fast learner, the manager will exaggerate his own information; but ultimately, he becomes too conservative, being unwilling to change his investments on the basis of new information. Our results arise purely from learning about competence rather than concavity or convexity of the rewards functions. We relate our results to the existing psychology literature concerning cognitive dissonance reduction.

JEL Classification: D83, G39

Suggested Citation

Prendergast, Canice and Stole, Lars, Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning. JOURNAL OF POLITICAL ECONOMY, Vol. 104, No. 6, December 1996. Available at SSRN: https://ssrn.com/abstract=3593

Canice Prendergast

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7309 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lars A. Stole (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7309 (Phone)
773-702-0458 (Fax)

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