Advanced Search
MyIDEAS: Login

Professional advice

Contents:

Author Info

  • Ottaviani, Marco
  • Sorensen, Peter Norman

Abstract

Professional experts offer advice with the objective of appearing well informed. Their ability is evaluated on the basis of the advice given and the realized state of the world. We model this situation as a reputational cheap-talk game with continuous signal, state, and ability type spaces. Despite allowing a message space as rich as the signal space, at best two messages are sent in the most informative equilibrium. The expert can credibly transmit only the direction but not the intensity of the information possessed. Equilibrium forecasts are then systematically less precise than under truthtelling, and learning on the expert's ability is slow.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6WJ3-4FFX8F9-4/2/c725d1e59691c36a0732ea74043d83e6
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 126 (2006)
Issue (Month): 1 (January)
Pages: 120-142

as in new window
Handle: RePEc:eee:jetheo:v:126:y:2006:i:1:p:120-142

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Holmstrom, Bengt & Ricart i Costa, Joan, 1986. "Managerial Incentives and Capital Management," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 835-60, November.
  2. Ehrbeck, Tilman & Waldmann, Robert, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 21-40, February.
  3. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  4. Abhijit Banerjee & Rohini Somanathan, 2001. "A Simple Model Of Voice," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 189-227, February.
  5. Judith Chevalier & Glenn Ellison, 1999. "Career Concerns Of Mutual Fund Managers," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 389-432, May.
  6. Vijay Krishna & John Morgan, 2001. "A Model Of Expertise," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 747-775, May.
  7. Ewerhart, Christian & Schmitz, Patrick W., 2000. ""Yes Men," Integrity, and the Optimal Design of Incentive Contracts," MPRA Paper 12534, University Library of Munich, Germany.
  8. Andrea Prat, 2002. "The Wrong Kind of Transparency," STICERD - Theoretical Economics Paper Series 439, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  9. Zitzewitz, Eric, 2001. "Measuring Herding and Exaggeration by Equity Analysts and Other Opinion Sellers," Research Papers 1802, Stanford University, Graduate School of Business.
  10. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
  11. Seidmann, Daniel J., 1990. "Effective cheap talk with conflicting interests," Journal of Economic Theory, Elsevier, vol. 50(2), pages 445-458, April.
  12. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  14. Harrison Hong & Jeffrey D. Kubik & Amit Solomon, 2000. "Security Analysts' Career Concerns and Herding of Earnings Forecasts," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 121-144, Spring.
  15. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  16. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  17. Piccione, Michele & Tan, Guofu, 1996. "A Simple Model of Expert and Non-Expert Bidding in First-Price Auctions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 501-515, August.
  18. Jeremy C. Stein & David S. Scharfstein, 2000. "Herd Behavior and Investment: Reply," American Economic Review, American Economic Association, vol. 90(3), pages 705-706, June.
  19. Wei Li, 2004. "Mind Changes in the Design of Reporting Protocols," Theory workshop papers 658612000000000085, UCLA Department of Economics.
  20. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
  21. Anat R. Admati & Paul Pfleiderer, 2004. "Broadcasting Opinions with an Overconfident Sender," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 467-498, 05.
  22. Owen Lamont, 1995. "Macroeconomics Forecasts and Microeconomic Forecasters," NBER Working Papers 5284, National Bureau of Economic Research, Inc.
  23. Peter Sorensen & Marco Ottaviani, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June.
  24. Watson, Joel, 1996. "Information Transmission When the Informed Party Is Confused," Games and Economic Behavior, Elsevier, vol. 12(1), pages 143-161, January.
  25. Welch, Ivo, 2000. "Herding among security analysts," Journal of Financial Economics, Elsevier, vol. 58(3), pages 369-396, December.
  26. Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 97-124.
  27. Adam Brandenburger & Ben Polak, 1996. "When Managers Cover Their Posteriors: Making the Decisions the Market Wants to See," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 523-541, Autumn.
  28. Lohmann, Susanne, 1994. "Information Aggregation through Costly Political Action," American Economic Review, American Economic Association, vol. 84(3), pages 518-30, June.
  29. Susanne Lohmann, 2010. "Information Aggregation Through Costly Political Action," Levine's Working Paper Archive 197, David K. Levine.
  30. John R. Graham, 1999. "Herding among Investment Newsletters: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(1), pages 237-268, 02.
  31. Olszewski, Wojciech, 2004. "Informal communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 180-200, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:126:y:2006:i:1:p:120-142. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.