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Strategic Consultation in the Presence of Career Concerns

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  • Gilat Levy

Abstract

In this paper I analyse the strategic interaction of decision makers and their advisers in a consultation process. I find that when agents are concerned about their reputation, consultation results in sub-optimal sharing of information; some decision makers may deliberately act unilaterally and not consult even when advice is costless. When they do consult, decision makers may excessively contradict their adviser's recommendation. Anticipating it, advisers may not report their information truthfully. These results are obtained without assuming either a tournament or a competition between decision makers and their advisers for wages or a future job.

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File URL: http://sticerd.lse.ac.uk/dps/te/te404.pdf
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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number 404.

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Date of creation: Nov 2000
Date of revision:
Handle: RePEc:cep:stitep:404

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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

Related research

Keywords: Reputation; consultation; relative performance evaluation;

References

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  1. Meyer, Margaret A & Vickers, John, 1997. "Performance Comparisons and Dynamic Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 547-81, June.
  2. Stephen Morris, 1998. "An Instrumental Theory of Political Correctness," Discussion Papers 1209, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 97-124.
  4. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  5. repec:fth:stanho:e-89-7 is not listed on IDEAS
  6. Vijay Krishna & John Morgan, 2001. "A Model Of Expertise," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 747-775, May.
  7. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA.
  8. Prendergast, Canice, 1993. "A Theory of "Yes Men."," American Economic Review, American Economic Association, vol. 83(4), pages 757-70, September.
  9. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  10. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  11. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  12. Cremer, Jacques, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 275-95, May.
  13. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap Talk with Two Audiences," American Economic Review, American Economic Association, vol. 79(5), pages 1214-23, December.
  14. Judith Chevalier & Glenn Ellison, 1999. "Career Concerns Of Mutual Fund Managers," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 389-432, May.
  15. Peter Sorensen & Marco Ottaviani, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June.
  16. Friebel, Guido & Raith, Michael, 2000. "Strategic Recruiting And The Chain Of Command," CEPR Discussion Papers 2429, C.E.P.R. Discussion Papers.
  17. Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
  18. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-34, December.
  19. Austen-Smith David, 1993. "Interested Experts and Policy Advice: Multiple Referrals under Open Rule," Games and Economic Behavior, Elsevier, vol. 5(1), pages 3-43, January.
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Citations

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Cited by:
  1. Andrea Prat, 2005. "The Wrong Kind of Transparency," American Economic Review, American Economic Association, vol. 95(3), pages 862-877, June.
  2. Steven D. Levitt & Chad Syverson, 2005. "Market Distortions when Agents are Better Informed: The Value of Information in Real Estate Transactions," NBER Working Papers 11053, National Bureau of Economic Research, Inc.
  3. Levy, Gilat, 2004. "Anti-herding and strategic consultation," European Economic Review, Elsevier, vol. 48(3), pages 503-525, June.

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