Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76196
Authors: 
Gärtner, Dennis
Year of Publication: 
2004
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0413
Abstract: 
This paper investigates the design of incentives in a dynamic adverse selection framework when agents' production technologies display learning effects and agents' rate of learning is private knowledge. In a simple two-period model with full commitment available to the principal, we show that whether learning effects are over- or under-exploited crucially depends on whether learning effects increase or decrease the principal's uncertainty about agents' costs of production. Hence, what drives the over- or under-exploitation of learning effects is whether more efficient agents also learn faster (so costs diverge through learning effects) or whether it is the less efficient agents who learn faster (so costs converge). Furthermore, we show that if divergence in costs through learning effects is strong enough, learning effects will not be exploited at all, in a sense to be made precise.
Subjects: 
asymmetric Information
Learning by Doing
Regulation
JEL: 
D82
L14
L43
L51
O31
Document Type: 
Working Paper

Files in This Item:
File
Size
527.99 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.