Committees As Active Audiences: Reputation Concerns and Information Acquisition

Tinbergen Institute Discussion Paper 2018-068/VII

42 Pages Posted: 26 Sep 2018 Last revised: 23 Jun 2019

See all articles by Otto H. Swank

Otto H. Swank

Erasmus University Rotterdam - Department of Economics; Tinbergen Institute Rotterdam (TIR)

Bauke Visser

Erasmus University Rotterdam - Department of Economics; Tinbergen Institute Rotterdam (TIR)

Date Written: May 1, 2019

Abstract

We study committees that acquire information, deliberate and vote. A member cares about state-dependent decision payoffs and about his reputation for expertise. The state remains unobserved, even after the decision has been taken. In such inconclusive environments, in equilibrium, a member's internal (peer) reputation is based on deliberation patterns, while members' external (market) reputation is based on the observed group decision. Either form of reputation concerns create strategic complementarity among members' effort levels. Internal reputations create stronger incentives to become informed than external reputations, and their strength grows in committee size; external reputations create no incentives in large committees. If prior information favors a state, internal – not external – reputations may hinder deliberation. In equilibrium, reputation concerns lead to additional information acquisition without affecting the expected reputations. Nevertheless, moderate rates of reputation concerns relax members' participation constraints, by counteracting the often predicted underprovision of information in committees.

Keywords: Committee Decision Making, Reputation Concerns, Information Acquisition, Peers, Markets

JEL Classification: D71, D83

Suggested Citation

Swank, Otto H. and Visser, Bauke, Committees As Active Audiences: Reputation Concerns and Information Acquisition (May 1, 2019). Tinbergen Institute Discussion Paper 2018-068/VII. Available at SSRN: https://ssrn.com/abstract=3243000 or http://dx.doi.org/10.2139/ssrn.3243000

Otto H. Swank (Contact Author)

Erasmus University Rotterdam - Department of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Tinbergen Institute Rotterdam (TIR)

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 4081448 (Phone)
+31 10 2120551 (Fax)

Bauke Visser

Erasmus University Rotterdam - Department of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+ 31 (0)10 40 81449 (81441) (Phone)
+ 31 (0)10 40 89149 (Fax)

Tinbergen Institute Rotterdam (TIR)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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