Seminar

Research and the Approval Process

Emeric Henry (Sciences Po - Paris)

April 7, 2014, 14:00–15:30

Room MF 323

Industrial Organization seminar

Abstract

An agent sequentially collects information to obtain a principal’s approval, such as a pharmaceutical company seeking FDA approval to introduce a new drug. To capture such environments, we study strategic versions of the optimal stopping time problem first proposed by Wald (1945). Our flexible model allows us to consider different types of rules and commitments by the principal as well as strategic withholding of information by the agent. We shed light on current regulation and proposed reforms of the drug approval process. The model also captures situations such as a firm seeking antitrust approval to merge with a competitor, a manager proposing a project to the firm’s headquarters or an author submitting a paper to an editor.