PE Research Seminar: Ephraim Shimko

Dec 10, 2021, 12:15 pm12:15 pm
Wallace 300



Event Description

Investigations are an important tool the state uses to uncover wrongdoing by private citizens, public officials, and corporate entities. In this article, we study an environment in which an investigator investigates a potentially guilty party who, in turn, can invest resources into distorting the information provided to the investigator. We characterize the set of equilibria and show that in every equilibrium a guilty party increases the amount they distort information as time progresses. We consider the model in the context of an investigation into an elected official who may have engaged in wrongdoing, but seeks re-election. Total truth-finding via full cooperation or discovery during an investigation is affected by legally enforceable penalties as well as voter preferences, both of which affect the politician's distortion strategy. Voter information at the time of election depends crucially on whether or not the presence of an election induces a hard deadline for the investigator. Interestingly, voter distaste for lying, as well as high legal penalties, increase distortions and lead to re-election of candidates who would not be re-elected under full information more often, provided that the electoral deadline is non-binding. When the electoral constraint binds, voter distaste for wrongdoing, as well as higher penalties, can sometimes increase truth-finding and improve accountability.