NANCY Seminar – John Hamman (Florida State University)

Détails de l'événement :

“Would I Lie to You? Project Selection with Biased Advice” (with Miguel Martínez-Carrasco and Eric Schmidbauer)

Abstract:

A common agency problem in organizations involves biased agents with private information competing for resources from a principal (e.g., a CEO decides which division manager’s project to fund). However, possible future interaction can mitigate this problem even without reputational concerns, since an agent who induces acceptance of a low-valued project today consumes resources that crowd out even better opportunities that may arrive in the future. Adapting the theoretical model from Schmidbauer (2017), we devise experiments to address this organizational environment. Specifically, we study the incentives of competing agents to strategically communicate about their own project’s value to an uninformed decision maker when new projects arrive over time. After observing all advice from agents, the decision maker decides which project to adopt, if any. If no project is adopted subjects enter the next period with new independently drawn projects and continue indefinitely until one project is adopted. We hypothesize that truth telling is easier to support the smaller is the benefit from a low-quality project or the more likely it is to occur, but harder to support as agent competition grows. Our findings in a one-shot game are broadly consistent with these hypotheses.  Interestingly, repeated play with anonymous rematching does not improve convergence towards the model predictions, largely driven by increasingly pessimistic beliefs.