Innovation and information acquisition under time inconsistency and uncertainty

Sophie Chemarin (1) , Caroline Orset (2)

1 CECO - Laboratoire d'économétrie de l'École polytechnique
2 LERNA - Economie des Ressources Naturelles

This paper analyzes the impact of hyperbolic discounting preferences on the
agent's information acquisition decision who wants to undertake a potential
dangerous activity for human health or the environment. We find that below
certain discount rate threshold, an agent prefers ignoring information and
continuing his project. On the other hand, above this threshold, it is optimal for
him to acquire information, and the investment for acquiring the information is
increasing with the discount rate. We then conclude that hyperbolic discounting
preferences limit the information acquisition. Moreover, we explain that the lack
of self-control induced by hyperbolic discounting preferences also restraints the
information acquisition. Finally, we analyze the efficiency of the strict liability
rule and the negligence rule to motivate the agent to acquire information.

Mots clés: Innovation; information acquisition; uncertainty; self-control; time inconsistency; <br />liability rules

Domaines: Economies et finances

Sophie Chemarin, Caroline Orset. Innovation and information acquisition under time inconsistency and uncertainty. 2008. ⟨halshs-00226656⟩