DP11939 Research and the Approval Process: The Organization of Persuasion
|Author(s):||Emeric Henry, Marco Ottaviani|
|Publication Date:||March 2017|
|Keyword(s):||Approval, Information, Organization, Persuasion|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=11939|
An informer sequentially collects information at a cost to influence an evaluator's choice between rejection and approval. Payoffs and control rights are split between informer and evaluator depending on the organizational rules governing the approval process. We compare the performance of different organizations from a positive and normative perspective, depending on the commitment power of informer and evaluator. As a welfare benchmark we recover Wald's (1947) classic solution for a statistician with payoff equal to the sum of our informer and evaluator. We apply the analysis to the regulatory process for drug approval and to the market for new technologies.