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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. Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Game Theory and Information 9902003, EconWPA.
    • Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Working Papers 154, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
    • Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
  2. 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.
  3. Farrell, J. & Gibbons, R., 1989. "Cheap Talk With Two Audiences," Working papers 518, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Cremer, Jacques, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 275-95, May.
  5. Meyer, Margaret A & Vickers, John, 1995. "Performance Comparisons and Dynamic Incentives," CEPR Discussion Papers 1107, C.E.P.R. Discussion Papers.
  6. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  7. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. Peter Sorensen & Marco Ottaviani, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June.
  9. 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.
  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. Prendergast, Canice, 1993. "A Theory of "Yes Men."," American Economic Review, American Economic Association, vol. 83(4), pages 757-70, September.
  12. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA.
  13. Stephen Morris, 1998. "An Instrumental Theory of Political Correctness," Discussion Papers 1209, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Friebel, Guido & Raith, Michael, 2000. "Strategic Recruiting And The Chain Of Command," CEPR Discussion Papers 2429, C.E.P.R. Discussion Papers.
  15. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  16. 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.
  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. Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 97-124.
  19. repec:fth:stanho:e-89-7 is not listed on IDEAS
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Citations

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Cited by:
  1. Levy, Gilat, 2004. "Anti-herding and strategic consultation," European Economic Review, Elsevier, vol. 48(3), pages 503-525, 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. Andrea Prat, 2005. "The Wrong Kind of Transparency," American Economic Review, American Economic Association, vol. 95(3), pages 862-877, June.

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