Template-Type: ReDIF-Paper 1.0
Title: The Wrong Kind of Information
Author-Name: Aditya Kuvalekar
Author-Name: João Ramos
Author-Name: Johannes Schneider
Author-Email: jschneid@eco.uc3m.es
Classification-JEL:  D01, K13, L51
Keywords: deterrence, chilling effect, screening



Abstract: Agents, some with a bias, decide between undertaking a risky project and a safe alternative based on information about the project's efficiency. Only a part of that information is verifiable. Unbiased agents want to undertake only efficient projects, while biased agents want to undertake any project. If the project causes harm, a court examines the verifiable information, forms a belief about the agent's type, and decides the punishment. Tension arises between deterring inefficient projects and a chilling effect on using the unverifiable information. Improving the unverifiable information always increases overall efficiency, but improving the verifiable information may reduce efficiency.

Note: 
Length: 45
Creation-Date: 2022-06
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp357
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2022_357