The Wrong Kind of Information Articles uri icon

publication date

  • May 2023

start page

  • 360

end page

  • 384

issue

  • 2

volume

  • 54

International Standard Serial Number (ISSN)

  • 0741-6261

Electronic International Standard Serial Number (EISSN)

  • 1756-2171

abstract

  • Agents, some with a bias, decide between undertaking a risky project and a safe alternative based on information about the project's efficiency. Only a part of that information is verifiable. Unbiased agents want to undertake only efficient projects, but biased agents want to undertake any project. If the project causes harm, a court examines the verifiable information, forms a belief about the agent's type, and decides the punishment. Tension arises between deterring inefficient projects and a chilling effect on using the unverifiable information. Improving the unverifiable information always increases overall efficiency, but improving the verifiable information may reduce efficiency.

subjects

  • Economics