Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/230466
Authors: 
Chen, Chia-hui
Ishida, Junichiro
Suen, Wing-chuen
Year of Publication: 
2019
Series/Report no.: 
ISER Discussion Paper No. 1060
Abstract: 
We develop a general model, with the exponential bandit as a special case, in which high-ability agents are more likely to achieve early success but also learn faster that their project is not promising. These counteracting effects give rise to a signaling model in which the single-crossing condition fails but a double-crossing property holds. We characterize the unique D1 equilibrium under double-crossing condition, and show that it tends to produce pooling. Ability to identify good projects and ability to execute a good project have different implications for the equilibrium allocation. Our model also incorporates public news, which generates dynamic distortions.
Subjects: 
double-crossing property
D1 equilibrium refinement
dynamic signaling
venture startups
JEL: 
D82
D83
O31
Document Type: 
Working Paper

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