Good and Bad Transparency: Information Control in Consultation Under Career Concerns

19 Pages Posted: 10 Oct 2007

See all articles by Shan Zhao

Shan Zhao

City University of Hong Kong

Date Written: June 2007

Abstract

Motivated by some real world phenomena, we extend the standard model of decision making with a possibly biased decision maker under career concerns by adding: 1) a consultation stage in which the advice from an advisor is available; 2) the possibility that the decision maker can control the informativeness of the signal that the advisor receives. We find that transparency (i.e., making the advice public) is good for welfare due to more disciplining. However, this benefit can be seriously reduced (even to zero) if information control by the decision maker is possible. The main intuition is that a bad decision maker can lessen this disciplining by information control.

Keywords: Transparency, Reputation, Information control, Consultation

JEL Classification: D78, D82, D83

Suggested Citation

Zhao, Shan, Good and Bad Transparency: Information Control in Consultation Under Career Concerns (June 2007). Available at SSRN: https://ssrn.com/abstract=1020311 or http://dx.doi.org/10.2139/ssrn.1020311

Shan Zhao (Contact Author)

City University of Hong Kong ( email )

Hong Kong

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