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Opinions as Incentives

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  • Yeon-Koo Che
  • Navin Kartik

Abstract

We study costs and benefits of differences of opinion between an adviser and a decision maker. Even when they share the same underlying preferences over decisions, a difference of opinion about payoff-relevant information leads to strategic information acquisition and transmission. A decision maker faces a fundamental trade-off: a greater difference of opinion increases an adviser's incentives to acquire information but exacerbates the strategic disclosure of any information that is acquired. Nevertheless, when choosing from a rich pool of opinion types, it is optimal for a decision maker to select an adviser with some difference of opinion. Centralization of authority is essential to harness these incentive gains since delegation to the adviser can discourage effort. (c) 2009 by The University of Chicago. All rights reserved..

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 117 (2009)
Issue (Month): 5 (October)
Pages: 815-860

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Handle: RePEc:ucp:jpolec:v:117:y:2009:i:5:p:815-860

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  1. Hao Li & Wing Suen, 2004. "Delegating Decisions to Experts," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S311-S335, February.
  2. Hao Li, 2001. "A Theory of Conservatism," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 617-636, June.
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