Biased Recommendations from Biased and Unbiased Experts

42 Pages Posted: 24 Oct 2012 Last revised: 15 Aug 2016

See all articles by Wonsuk Chung

Wonsuk Chung

Indiana University Bloomington - Department of Economics

Rick Harbaugh

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy; Indiana University - Department of Economics

Date Written: August 14, 2016

Abstract

Can experts be trusted to provide useful recommendations? We develop and experimentally test a simplified recommendation game where an expert recommends one of two actions to a decision maker who might instead take no action. Consistent with predictions from the cheap talk literature, we find that recommendations are persuasive in that they induce actions benefiting the expert, but decision makers partially discount recommendations for the action a biased expert favors. Even unbiased experts pander by recommending the action that the decision maker already favors, which decision makers then discount. And if the decision maker is uncertain over whether the expert is biased or not toward an action, unbiased experts follow a political correctness strategy of recommending the opposite action to be more persuasive. However, decision makers do not sufficiently anticipate how uncertainty over the expert's bias gives even unbiased experts an incentive to lie, implying that transparency may be even more important to successful communication in practice than it is in theory.

Keywords: cheap talk, deception, persuasion, transparency, pandering, political correctness, lying aversion

JEL Classification: D82, C92, M3

Suggested Citation

Chung, Wonsuk and Harbaugh, Rick, Biased Recommendations from Biased and Unbiased Experts (August 14, 2016). Available at SSRN: https://ssrn.com/abstract=2166379 or http://dx.doi.org/10.2139/ssrn.2166379

Wonsuk Chung

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

Rick Harbaugh (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-855-2777 (Phone)
812-855-3354 (Fax)

HOME PAGE: http://www.bus.indiana.edu/riharbau/

Indiana University - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

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