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Avoiding Judgement by Recommending Inaction: Beliefs Manipulation and Reputational Concerns

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  • Camara, Fanny

Abstract

To evaluate an expert, the audience needs to compare the prediction of the expert with the realized outcome. But the prediction often affects the amount of public information about the outcome. The result is that the expert can manipulate her audience's ability to monitor the accuracy of her prediction. In a cheap-talk framework, we study how the endogenous nature of public information about the state of the world affects the information transmitted by an expert with reputational concerns. Our innovation consists in assuming that the precision of the public information on the realized state increases monotonically with the audience's interim beliefs. In addition to the conservatism bias found in the existing literature, our model predicts that (i) the expert is less communicative when the prior is low, and (ii) a higher initial reputation can make the expert less credible.(JEL D82, D83, L15)

Suggested Citation

  • Camara, Fanny, 2019. "Avoiding Judgement by Recommending Inaction: Beliefs Manipulation and Reputational Concerns," CEPR Discussion Papers 14149, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14149
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    References listed on IDEAS

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    Cited by:

    1. Lukyanov, Georgy, 2023. "Reputation for competence in a cheap-talk setting," Research in Economics, Elsevier, vol. 77(3), pages 285-294.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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