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Cheap-Talk Referrals of Differentiated Experts in Repeated Relationships

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  • In-Uck Park

    ()
    (University of Bristol, U.K.)

Abstract

The effectiveness of cheap talk advice is examined in recurrent relationships between a customer and multiple experts who provide differentiated professional services. The main findings are: (i) Full honesty is not sustainable if the profitability of service provision varies widely across problems. (ii) As there are more experts due to finer specialization, the maximum equilibrium honesty level deteriorates. (iii) Nonetheless, the equilibria that satisfy an internal consistency condition, implement the same (unique) honesty level regardless of the number of experts. Furthermore, the customer can extract this honesty level by consulting a ``panel'' of only one or two (but no more) experts all the time.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 36 (2005)
Issue (Month): 2 (Summer)
Pages: 391-411

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Handle: RePEc:rje:randje:v:36:y:2005:2:p:391-411

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Cited by:
  1. Fabio Landini & Antonio Nicolò & Marco Piovesan, 2013. "The Hidden Cost of Specialization," IFRO Working Paper 2013/9, University of Copenhagen, Department of Food and Resource Economics.
  2. Alexander Rasch & Christian Waibel, 2013. "What drives fraud in a credence goods market? Evidence from a field study," CER-ETH Economics working paper series 13/179, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  3. Dominik Erharter, 2012. "Credence goods markets, distributional preferences and the role of institutions," Working Papers 2012-11, Faculty of Economics and Statistics, University of Innsbruck.
  4. Bruno Jullien & In-Uck Park, 2009. "Seller Reputation and Trust in Pre-Trade Communication," Levine's Working Paper Archive 814577000000000330, David K. Levine.
  5. Kohei Kawamura, 2007. "Constrained Communication with Multiple Agents: Anonymity, Equal Treatment, and Public Good Provision," ESE Discussion Papers 166, Edinburgh School of Economics, University of Edinburgh.
  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. Jullien, Bruno & Park, In-Uck, 2009. "New, Like New, or Very Good? Reputation and Credibility," TSE Working Papers 09-086, Toulouse School of Economics (TSE), revised 29 Jan 2014.
  8. repec:cgr:cgsser:03-07 is not listed on IDEAS
  9. Junghun Cho, 2006. "Multiple Advisors with Reputation," CERGE-EI Working Papers wp314, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  10. LI, Ming & MYLOVANOV, Tymofiy, 2010. "Credibility for Sale - The Effect of Disclosure on Information Acquisition and Transmission," Cahiers de recherche 08-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.

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