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Policy Advice with Imperfectly Informed Experts

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Author Info

  • Marco Battaglini

    (Princeton University and CEPR)

Abstract

We study policy advice by several experts with noisy private information and biased preferences. We highlight a trade-off between the truthfulness of the information revealed by each expert and the number of signals from different experts that can be aggregated to reduce noise. Contrary to models with perfectly informed experts, because of this trade-off, full revelation of information is never possible. However, almost fully efficient information extraction can be obtained in two cases. First, there is an equilibrium in which the outcome converges to the first best benchmark with no asymmetric information as we increase the precision the experts' signals. Second, the inefficiency in communication also converges to zero as the number of experts increases, even when the residual noise in the experts' private signals is large and all the experts have significant and similar (but not necessarily identical) biases.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): advances.4 (2004)
Issue (Month): 1 ()
Pages: 1

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Handle: RePEc:bpj:bejtec:v:advances.4:y:2004:i:1:n:1

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Web page: http://www.degruyter.com

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Related research

Keywords: Asymmetric Information; Cheap talk; Experts.;

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Citations

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Cited by:
  1. Andrea Galeotti & Christian Ghiglino & Francesco Squintani, 2009. "Strategic Information Transmission in Networks," Economics Discussion Papers 668, University of Essex, Department of Economics.
  2. Jackson, Aaron L., 2010. "Policy futures markets with multiple goals," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 45-54, March.
  3. Roger Lagunoff, 2002. "Credible Communication in Dynastic Government," Working Papers gueconwpa~02-02-04, Georgetown University, Department of Economics.
  4. Tymofiy Mylovanov & Andriy Zapechelnyuk, 2010. "Decision Rules for Experts with Opposing Interests," Working Papers 674, Queen Mary, University of London, School of Economics and Finance.
  5. Randall Holcombe & Dmitry Ryvkin, 2010. "Policy errors in executive and legislative decision-making," Public Choice, Springer, vol. 144(1), pages 37-51, July.
  6. Junghun Cho, 2008. "Sequential Cheap Talk from Advisors with Reputation," CERGE-EI Working Papers wp352, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  7. Dezsö Szalay & Ramon Arean, 2005. "Communicating with a Team of Experts," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 05.12, Université de Lausanne, Faculté des HEC, DEEP.
  8. Adam Meirowitz, 2007. "Communication and bargaining in the spatial model," International Journal of Game Theory, Springer, vol. 35(2), pages 251-266, January.
  9. Ronny Razin & Gilat Levy, 2004. "Multidimentional Cheap Talk," 2004 Meeting Papers 184, Society for Economic Dynamics.
  10. Dino Gerardi & Richard McLean & Andrew Postlewaite, 2005. "Aggregation of Expert Opinions," PIER Working Paper Archive 05-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  11. Junichiro Ishida & Takashi Shimizu, 2009. "Cheap Talk with an Informed Receiver," ISER Discussion Paper 0746, Institute of Social and Economic Research, Osaka University.
  12. Thomas König & Bernd Luig & Stephan Marc Solomon, 2010. "Sachverständige und der Einfluss von Expertise auf Reformen: Eine räumliche Analyse der Föderalismusreform II," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(3), pages 307-323, 08.
  13. Junghun Cho, 2006. "Multiple Advisors with Reputation," CERGE-EI Working Papers wp314, The Center for Economic Research and Graduate Education - Economic Institute, Prague.

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