Pandering to Persuade
AbstractAn agent advises a principal on selecting one of multiple projects or an outside option. The agent is privately informed about the projects' benefits and shares the principal's preferences except for not internalizing her value from the outside option. We show that for moderate outside option values, strategic communication is characterized by pandering: the agent biases his recommendation toward "conditionally better-looking" projects, even when both parties would be better off with some other project. A project that has lower expected value can be conditionally better-looking. We develop comparative statics and implications of pandering. Pandering is also induced by an optimal mechanism without transfers. (JEL D23, D82)
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Bibliographic InfoPaper provided by UCLA Department of Economics in its series Levine's Bibliography with number 661465000000000197.
Date of creation: 28 Sep 2010
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Other versions of this item:
- Yeon-Koo Che & Wouter Dessein & Navin Kartik, 2013. "Pandering to Persuade," American Economic Review, American Economic Association, American Economic Association, vol. 103(1), pages 47-79, February.
- Yeon-Koo Che & Wouter Dessein & Navin Kartik, 2010. "Pandering to Persuade," Levine's Bibliography 661465000000000163, UCLA Department of Economics.
- Che, Yeon-Koo & Dessein, Wouter & Kartik, Navin, 2010. "Pandering to Persuade," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7970, C.E.P.R. Discussion Papers.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-09 (All new papers)
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