English, Article, Journal or magazine article edition: Sequential Decisions with Tests David Gill; Daniel Sgroi

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Bookmark: http://trove.nla.gov.au/version/21184
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Sequential Decisions with Tests
Author
  • David Gill
  • Daniel Sgroi
Physical Description
  • preprint
Notes
  • We consider a principal-agent problem where the principal wishes to be endorsed by a sequence of agents, but cannot truthfully reveal type. In the standard "herding" model, the agents learn from each other`s decisions, which can lead to cascades on a given decision when later agents` private information is swamped. We augment the standard model to allow the principal to subject herself to a test designed to provide public information about her type. She must decide how tough a test to attempt from a continuum of test types, which involves trading off the higher probability of passing an easier test against the greater impact from passing a tougher test. We find that the principal will always choose to be tested, and will prefer a tough test to a neutral or easy one.
  • Bayesian Updating, Endorsements, Herding, Sequential Decision-Making, Tests
  • RePEc:oxf:wpaper:242
Language
  • English
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