DP8531 Time to Decide: Information Search and Revelation in Groups

Author(s): Arthur Campbell, Florian Ederer, Johannes Spinnewijn
Publication Date: August 2011
Keyword(s): deadlines, group decisions, information disclosure, information search
JEL(s): D71, D82, D83, H42
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8531

We analyze costly information acquisition and information revelation in groups in a dynamic setting. Even when group members have perfectly aligned interests the group may inefficiently delay decisions. When deadlines are far away, uninformed group members freeride on each others' efforts to acquire information. When deadlines draw close, informed group members stop revealing their information in an attempt to incentivize other group members to continue searching for information. Surprisingly, setting a tighter deadline may increase the expected decision time and increase the expected accuracy of the decision in the unique equilibrium. As long as the deadline is set optimally, welfare is higher when information is only privately observable to the agent who obtained information rather than to the entire group.