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The Power of Referential Advice

Author

Listed:
  • Steven Callander
  • Nicolas S. Lambert
  • Niko Matouschek

Abstract

Expert advice often extends beyond a simple recommendation, including information about alternative options. To explore the role of this referential advice, we enrich the expert’s informational advantage in a canonical model of communication with hard information. We show that when constructed just right, referential advice dissuades the decision maker from choosing options other than the recommendation, thereby making the recommendation itself more persuasive. We identify an equilibrium in which, with probability 1, the expert is strictly better off providing referential advice than she is in any equilibrium in which she provides a recommendation alone.

Suggested Citation

  • Steven Callander & Nicolas S. Lambert & Niko Matouschek, 2021. "The Power of Referential Advice," Journal of Political Economy, University of Chicago Press, vol. 129(11), pages 3073-3140.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/715850
    DOI: 10.1086/715850
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    Cited by:

    1. Benjamin Davies, 2022. "Why do experts give simple advice?," Papers 2209.11710, arXiv.org.
    2. Li, Run, 2022. "Full revelation of expertise before disclosure," Economics Letters, Elsevier, vol. 221(C).
    3. Christoph Carnehl & Johannes Schneider, 2021. "A Quest for Knowledge," Papers 2102.13434, arXiv.org, revised Aug 2023.

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