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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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.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Farrell, Joseph & Gibbons, Robert, 1989.
"Cheap Talk with Two Audiences,"
American Economic Review,
American Economic Association, vol. 79(5), pages 1214-23, December.
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Scharfstein, David. & Stein, Jeremy C., 1988.
"Herd behavior and investment,"
Working papers
WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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