Investment Timing and Reputation
Abstract
An agent learns dynamically about the profitability of a project and decides when to make an irreversible investment. The agent seeks to maximize his reputation for learning. Equilibrium investment behavior is dictated by the prior about the project: the agent can be more willing to invest in projects that are ex-ante less likely to succeed. Compared to a benchmark where the agent is profit-driven, investment timing may be either premature or delayed. For projects with a low probability of success or large downside potential, reputation induces premature investment. Meanwhile, for projects with a high probability of success, reputation induces delayed investment.
About Sara Shahanagui
Sara Shahanaghi is a microeconomic theorist at the Toulouse School of Economics. She joined TSE as an assistant professor in 2022 after obtaining her PhD from Columbia University. Prior to her PhD, she was a senior research analyst at the Federal Reserve Bank of New York. Her research is primarily in dynamic games, with a focus on timing games and reputation. She has applied these methods to study strategic news reporting by media outlets and investment by managers.
Language: English
This is a free seminar. Registration is mandatory.