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Soliciting Advice: Active versus Passive Principals

Author

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  • Heikki Rantakari

Abstract

An uninformed principal elicits recommendations from privately informed agents regarding the quality of their projects, and may then further investigate the proposals. Although valuable by itself, the principal’s ability to acquire further information generally crowds out soft information, and may even worsen organizational performance. Further, the impact of further investigations on the precision of soft information is non-monotone. Activist principals are preferred over passive principals if they are always sufficiently involved. Principals that engage in selective involvement are most harmful to the organization (JEL C72, D82, D83).

Suggested Citation

  • Heikki Rantakari, 2016. "Soliciting Advice: Active versus Passive Principals," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(4), pages 719-761.
    • Handle: RePEc:oup:jleorg:v:32:y:2016:i:4:p:719-761.
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    File URL: http://hdl.handle.net/10.1093/jleo/eww002
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    Citations

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    Cited by:

    1. Agnieszka Rusinowska & Vassili Vergopoulos, 2020. "Ingratiation and Favoritism in Organizations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(3), pages 413-445.
    2. Bijkerk, Suzanne H. & Karamychev, Vladimir & Swank, Otto H., 2018. "When words are not enough," Journal of Economic Behavior & Organization, Elsevier, vol. 149(C), pages 294-314.
    3. Chloe Tergiman & Marie Claire Villeval, 2023. "The Way People Lie in Markets: Detectable vs. Deniable Lies," Management Science, INFORMS, vol. 69(6), pages 3340-3357, June.
    4. Schmidbauer, Eric, 2019. "Budget selection when agents compete," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 255-268.
    5. Chloe Tergiman & Marie Claire Villeval, 2019. "The Way People Lie in Markets," Working Papers 1927, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    6. Zhuozheng Li & Huanxing Yang & Lan Zhang, 2019. "Pre-communication in a coordination game with incomplete information," International Journal of Game Theory, Springer;Game Theory Society, vol. 48(1), pages 109-141, March.
    7. Joanna Franaszek, 2021. "When Competence Hurts: Revelation of Complex Information," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 5-23.
    8. Luke M. Froeb & Bernhard Ganglmair & Steven Tschantz, 2016. "Adversarial Decision Making: Choosing between Models Constructed by Interested Parties," Journal of Law and Economics, University of Chicago Press, vol. 59(3), pages 527-548.
    9. Alonso, Ricardo & Rantakari, Heikki, 2022. "The art of brevity," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 257-271.
    10. Li, Zhuozheng & Rantakari, Heikki & Yang, Huanxing, 2016. "Competitive cheap talk," Games and Economic Behavior, Elsevier, vol. 96(C), pages 65-89.
    11. Schmidbauer, Eric, 2017. "Multi-period competitive cheap talk with highly biased experts," Games and Economic Behavior, Elsevier, vol. 102(C), pages 240-254.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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