Advertisement

Economics of Governance

, Volume 1, Issue 2, pp 137–155 | Cite as

Rush, delay or money burning: Informational biases in policy decisions

  • Hans Gersbach
Original Papers
  • 33 Downloads

Abstract.

We examine the consequences when the public is unsure about the ability of governments to foresee the effects of decisions. Governments with much information should invest either immediately or never. Governments that are not well informed should wait for better information. But since governments want to signal their abilities to solve problems, we observe rash decisions and problems are portrayed as crises. We also show that excessive delay can occur. Delay or rush occur even if there is very little uncertainty about abilities of governments. We discuss three institutional rules to alleviate the rush and delay bias: Limiting expenditures before elections, experimental clauses or money burning.

Key words: rush, delay, competence, option values, money burning refinement, signalling. 
JEL classification: D72, D82, H50 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Copyright information

© Springer-Verlag Berlin Heidelberg 2000

Authors and Affiliations

  • Hans Gersbach
    • 1
  1. 1.Alfred-Weber-Institut, University of Heidelberg, Grabengasse 14, 69117 Heidelberg, Germany (e-mail: hans@gersbach.de) DE

Personalised recommendations