Pandering to Persuade
AbstractA principal chooses one of n>=2 projects or an outside option. An 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 strategic communication is characterized by pandering: the agent biases his recommendation toward good-looking projects--those with appealing observable attributes--even when both parties would be better off with some other project. Projects become more acceptable when pitched against a stronger slate of alternatives. We study organizational responses to the pandering distortion, such as delegation and choosing to be less informed.
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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:
- 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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