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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
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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. Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
  2. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA.
  3. 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.
  4. Friebel, Guido & Raith, Michael, 2000. "Strategic Recruiting And The Chain Of Command," CEPR Discussion Papers 2429, C.E.P.R. Discussion Papers.
  5. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-79, June.
  6. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  7. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  8. Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
  9. repec:fth:stanho:e-89-7 is not listed on IDEAS
  10. Prendergast, Canice, 1993. "A Theory of "Yes Men."," American Economic Review, American Economic Association, vol. 83(4), pages 757-70, September.
  11. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  12. 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.
  13. Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 97-124.
  14. Cremer, Jacques, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 275-95, May.
  15. Stephen Morris, 1998. "An Instrumental Theory of Political Correctness," Discussion Papers 1209, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap Talk with Two Audiences," American Economic Review, American Economic Association, vol. 79(5), pages 1214-23, December.
  17. Peter Sorensen & Marco Ottaviani, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June.
  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. Prat, Andrea, 2003. "The Wrong Kind of Transparency," CEPR Discussion Papers 3859, C.E.P.R. Discussion Papers.
  2. Steven D. Levitt & Chad Syverson, 2008. "Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 599-611, November.
  3. Levy, Gilat, 2004. "Anti-herding and strategic consultation," European Economic Review, Elsevier, vol. 48(3), pages 503-525, June.

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