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Biased Recommendations

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  • Wonsuk Chung

    (Department of Economics, Indiana University)

  • Rick Harbaugh

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

We develop and experimentally test a discrete choice model of an expert who recommends one of multiple actions to a decision maker who might take no action. Consistent with the recent theoretical literature on cheap talk recommendations, we find that recommendations are "persuasive" in that they reduce the chance that the decision maker takes no action, that recommendations for an action the expert benefits more from are "discounted", that lack of "transparency" about expert incentives undermines communication by both biased and unbiased experts, and that experts "pander" to the perceived preferences of the decision maker.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2012-02-chung-harbaugh.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2012-02.

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Date of creation: Apr 2012
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Handle: RePEc:iuk:wpaper:2012-02

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Related research

Keywords: cheap talk; discrete choice; deception; persuasion; discounting; transparency; pandering;

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References

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  1. Santiago Sanchez-Pages & Marc Vorsatz, 2004. "An Experimental Study of Truth-Telling in a Sender-Receiver Game," ESE Discussion Papers 128, Edinburgh School of Economics, University of Edinburgh.
  2. Gilat Levy & Ronny Razin, 2007. "On the Limits of Communication in Multidimensional Cheap Talk: A Comment," Econometrica, Econometric Society, Econometric Society, vol. 75(3), pages 885-893, 05.
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  10. Archishman Chakraborty & Rick Harbaugh, 2012. "Persuasive Puffery," Working Papers, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy 2012-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
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Cited by:
  1. Sobel, Joel, 2013. "Ten possible experiments on communication and deception," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 408-413.

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