Experts, Conflicts of Interest, and Reputation for Ability

International Journal of Economic Theory (IJET), Forthcoming

29 Pages Posted: 2 Dec 2013

See all articles by Filippo Pavesi

Filippo Pavesi

Università Carlo Cattaneo (LIUC) - Institute of Economics; Stevens Institute of Technology - School of Business

Massimo Scotti

University of Technology Sydney

Date Written: June 1, 2012

Abstract

We analyze a model of cheap talk in which an expert that faces a conflict of interest with a decision maker is concerned about establishing a reputation for having accurate information. In this environment, the incentive of the expert to establish a reputation for competence has a non-monotonic effect on the degree of information revelation. An increase in reputation above a certain threshold always makes truthful revelation more difficult to achieve. This is driven by the fact that experts with greater reputation for ability can more easily sway the beliefs of decision makers in a desired direction. Thus, higher levels of reputation exacerbate the incentives of biased experts to misreport their private information. Decision makers will therefore be better off consulting less reputable experts when conflicts are more pronounced.

Keywords: Experts; Reputation; Cheap Talk; Confl‡icts of Interest; Information Transmission.

JEL Classification: C72, D82, D83

Suggested Citation

Pavesi, Filippo and Scotti, Massimo, Experts, Conflicts of Interest, and Reputation for Ability (June 1, 2012). International Journal of Economic Theory (IJET), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2361879

Filippo Pavesi (Contact Author)

Università Carlo Cattaneo (LIUC) - Institute of Economics ( email )

21053 Castellanza (VA)
Italy

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Massimo Scotti

University of Technology Sydney ( email )

15 Broadway, Ultimo
Sydney
Australia

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