Multiple Advisors with Reputation
AbstractThis paper examines reputation, the belief of a decision maker about types of advisors, in a two period cheap talk model where the decision maker obtains messages from two advisors. The decision maker believes that an advisor can be one of two types - an advisor who is biased towards suggesting any particular advice (bad advisor) or an advisor who has the same preferences as the decision maker (good advisor). I assume that each advisor perfectly knows the type of the other advisor, but his signal about the state of the world is imperfect. Strong reputational concern makes the good advisor sometimes tell a lie in the first period regardless of the type of the other advisor. It is shown that the presence of the other advisor does affect the message sent by an advisor. The good advisor has a greater incentive to tell a lie when he knows that the other advisor is bad rather than good. If each type of advisor considers his second period sufficiently important, it is better for the decision maker to have a single advisor.
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Bibliographic InfoPaper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp314.
Date of creation: Dec 2006
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Reputation; Cheap talk;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-23 (All new papers)
- NEP-CBA-2007-01-23 (Central Banking)
- NEP-MAC-2007-01-23 (Macroeconomics)
- NEP-MON-2007-01-23 (Monetary Economics)
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Game Theory and Information
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