Negative results in science: Blessing or (winner's) curse?
Résumé
Two players receiving independent signals on a risky project with common value compete to be the first to invest. We characterize the equilibrium of this preemption game as the publicity of signals varies. Private signals create a winner's curse: the first mover suspects that his rival might have privately received adverse information, hence exited. To compensate, players seek more evidence supporting the project, resulting in later investment. A conservative planner concerned with avoiding unprofitable investments may then prefer private signals. Our results suggest that policy interventions should primarily tackle winner-takes-all competition, and regulate transparency only once competition is sufficiently mild.
Domaines
Economies et financesOrigine | Fichiers produits par l'(les) auteur(s) |
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