Decisions Under Persuasion
43 Pages Posted: 11 Dec 2019
Date Written: November 10, 2019
Many decisions are made based on persuasion. We examine information production and decision quality when persuasion occurs. Information underproduction arises when agents do not expect that their efforts in information production will lead to approval decisions. We use a setting where an agent seeks approval for a decision from an “approver.” We find that approvers’ decisions are more lenient (i.e., in favor of agents’ proposals) when their decisions rely on information supplied by agents than when they do not. However, the quality of decisions based on agents’ information is poorer than those based on approvers’ information. Taken together, our evidence suggests that the persuasion process is associated with bad news underproduction and relates to decision leniency and poor decision quality. We also show that the problem of information underproduction is less salient when the persuasion process occurs within firms than between firms.
Keywords: persuasion; information production; soft information; hierarchical decision-making; organizational structure
JEL Classification: D82; L22; M49
Suggested Citation: Suggested Citation