TY  - BOOK
AU  - Espinosa,Francisco
AU  - Ray,Debraj
ED  - National Bureau of Economic Research.
TI  - Noisy Agents
T2  - NBER working paper series
PY  - 2018///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - May 2018; Hardcopy version available to institutional subscribers
N2  - Agents signal their type in a principal-agent model; the principal seeks to retain good agents. Types are signaled with some ambient noise. Agents can choose to add or remove additional noise at a cost. It is shown that monotone retention strategies, in which the principal keeps the agent if the signal crosses some threshold, are generically never equilibria. The main result identifies an equilibrium with a bounded retention zone, in which the principal is wary of both excessively good and excessively bad signals: she retains the agent if the signal is "moderate" and replaces him otherwise. The equilibria we uncover are robust to various extensions: non-normal signal structures, non-binary types, interacting agents, costly mean-shifting, or dynamics with term limits. We discuss applications to risky portfolio management, fake news and noisy government statistics
UR  - https://www.nber.org/papers/w24627
UR  - http://dx.doi.org/10.3386/w24627
ER  -