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Why do experts give simple advice?

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  • Benjamin Davies

Abstract

An expert tells an advisee whether to take an action that may be good or bad. He may provide a condition under which to take the action. This condition predicts whether the action is good if and only if the expert is competent. Providing the condition exposes the expert to reputational risk by allowing the advisee to learn about his competence. He trades off the accuracy benefit and reputational risk induced by providing the condition. He prefers not to provide it -- i.e., to give "simple advice" -- when his payoff is sufficiently concave in the posterior belief about his competence.

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  • Benjamin Davies, 2022. "Why do experts give simple advice?," Papers 2209.11710, arXiv.org.
    • Handle: RePEc:arx:papers:2209.11710
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    File URL: http://arxiv.org/pdf/2209.11710
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    References listed on IDEAS

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