Experts, Conflicts of Interest, and Reputation for Ability
International Journal of Economic Theory (IJET), Forthcoming
29 Pages Posted: 2 Dec 2013
Date Written: June 1, 2012
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; Conflicts of Interest; Information Transmission.
JEL Classification: C72, D82, D83
Suggested Citation: Suggested Citation