David Pacuku: "The benefit of the deceived: Revealing principals’ gains from strategic information asymmetry"

Information asymmetry, as classic principal–agent theory shows, breeds inefficiencies: When the principal cannot observe an agent’s true effort, agents may steer projects toward private rather than organizational goals. Yet multi-agent contest models indicate that, by increasing agents’ outcome uncertainty, greater information asymmetry ultimately benefits the principal.

In this study, we show that a principal can benefit by obscuring information about their own monitoring ability because it increases the agents’ outcome uncertainty. We demonstrate this with a three-stage game in an innovation contest: First, the principal announces their monitoring ability. Then, two agents sequentially allocate effort between true quality and deceptive signaling for the innovation they develop. Lastly, the principal evaluates the innovations and determines a winner. Contrary to the current view, we show that under certain conditions, agents exert more effort on true quality if the principal claims to have imperfect monitoring ability.

David Pacuku started the PhD program at Kühne Logistics University in July 2022 under the supervision of Prof. Dr. Christina Raasch. His research focuses on innovation management, more specifically on the ideation, evaluation and implementation of innovations. Contributing to the “FabCity” project in Hamburg funded by the centre for digitalization and technology research of the Bundeswehr (dtec.bw), whose main goal is to promote a decentralized, digital, interlinked and urban production, his analysis gives emphasis to a local, population-driven development and implementation of innovative solutions.

David completed his Bachelor of Science in International Economics and his Master of Science in Economics at the University of Tübingen. Focusing on innovation economics, his master’s thesis dealt with the question of how the international transfer of technology contributes to growth in the global economy.  

During his studies David gained empirical experience working as an intern at the Roland Berger Institute. His work was especially characterized by the assistance in the preparation of publications in a broad field of economic topics, in which the analysis of data and their further processing played a major role.