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Persuading the Principal to Wait

Author

Listed:
  • Dmitry Orlov
  • Andrzej Skrzypacz
  • Pavel Zryumov
Abstract
A principal decides when to exercise a real option. A biased agent influences this decision by strategically disclosing information. Committing to disclose all information with a delay is the optimal way to persuade the principal to wait. Without dynamic commitment, this promise is credible only if the agent’s bias is small; otherwise, he pipets information, probabilistically delaying the principal’s action. When the agent is biased toward early exercise, his lack of commitment to remain quiet leads to immediate disclosure, hurting him. Our model applies to pharmaceutical companies conducting clinical trials to influence the Food and Drug Administration or equipment manufacturers testing their products.

Suggested Citation

  • Dmitry Orlov & Andrzej Skrzypacz & Pavel Zryumov, 2020. "Persuading the Principal to Wait," Journal of Political Economy, University of Chicago Press, vol. 128(7), pages 2542-2578.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/706687
    DOI: 10.1086/706687
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    Citations

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    Cited by:

    1. Kolotilin, Anton & Li, Hongyi, 2021. "Relational communication," Theoretical Economics, Econometric Society, vol. 16(4), November.
    2. Deng, Kebin & Peng, Jiaxin & Peng, Juan & Zhang, Yuhua, 2022. "Real options with overextrapolation," Economic Modelling, Elsevier, vol. 114(C).
    3. Emeric Henry & Marco Loseto & Marco Ottaviani, 2022. "Regulation with Experimentation: Ex Ante Approval, Ex Post Withdrawal, and Liability," Management Science, INFORMS, vol. 68(7), pages 5330-5347, July.
    4. Jonas Hedlund & T. Florian Kauffeldt & Malte Lammert, 2021. "Persuasion under ambiguity," Theory and Decision, Springer, vol. 90(3), pages 455-482, May.
    5. Jacopo Bizzotto & Adrien Vigier, 2021. "Can a better informed listener be easier to persuade?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(3), pages 705-721, October.
    6. Orlov, Dmitry, 2022. "Frequent monitoring in dynamic contracts," Journal of Economic Theory, Elsevier, vol. 206(C).
    7. Wu, Wenhao, 2023. "Sequential Bayesian persuasion," Journal of Economic Theory, Elsevier, vol. 214(C).
    8. Maxim Senkov, 2022. "Setting Interim Deadlines to Persuade," CERGE-EI Working Papers wp734, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    9. Krishnamurthy Iyer & Haifeng Xu & You Zu, 2023. "Markov Persuasion Processes with Endogenous Agent Beliefs," Papers 2307.03181, arXiv.org, revised Jul 2023.
    10. Gottardi, Piero & Mezzetti, Claudio, 2024. "Shuttle diplomacy," Journal of Economic Theory, Elsevier, vol. 216(C).
    11. Jan Knoepfle, 2024. "Dynamic Competition for Attention," Papers 2409.18595, arXiv.org, revised Oct 2024.
    12. Ehud Lehrer & Dimitry Shaiderman, 2022. "Markovian Persuasion with Stochastic Revelations," Papers 2204.08659, arXiv.org, revised May 2022.
    13. Teddy Mekonnen & Zeky Murra-Anton & Bobak Pakzad-Hurson, 2023. "Persuaded Search," Papers 2303.13409, arXiv.org, revised Aug 2024.
    14. Parakhonyak, Alexei & Vikander, Nick, 2023. "Information design through scarcity and social learning," Journal of Economic Theory, Elsevier, vol. 207(C).
    15. Kaya, Ayça, 2023. "Paying with information," Theoretical Economics, Econometric Society, vol. 18(2), May.
    16. Nuta, Shunya, 2024. "Starting rough, Dynamic persuasion with partial information," Economics Letters, Elsevier, vol. 239(C).

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