Advanced Search
MyIDEAS: Login to save this paper or follow this series

Biased Recommendations

Contents:

Author Info

  • 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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2012-02-chung-harbaugh.pdf
Download Restriction: no

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.

as in new window
Length:
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:iuk:wpaper:2012-02

Contact details of provider:
Postal: 1309 East Tenth Street, Room 451, Bloomington, IN 47405-1701
Phone: 812-855-9219
Fax: 812-855-3354
Email:
Web page: http://www.bus.indiana.edu/bepp/
More information through EDIRC

Related research

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

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Yeon-Koo Che & Wouter Dessein & Navin Kartik, 2010. "Pandering to Persuade," Levine's Bibliography 661465000000000197, UCLA Department of Economics.
  2. Mark Armstrong & John Vickers & Jidong Zhou, 2009. "Prominence and consumer search," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 209-233.
  3. Alistair J. Wilson & Emanuel Vespa, 2012. "Communication With Multiple Senders and Multiple Dimensions: An Experiment," Working Papers 401, University of Pittsburgh, Department of Economics, revised Mar 2012.
  4. Roland Hodler & Simon Loertscher & Dominic Rohner, 2010. "Biased Experts, Costly Lies, and Binary Decisions," Working Papers 10.01, Swiss National Bank, Study Center Gerzensee.
  5. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  6. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December.
  7. 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.
  8. Morgan, J. & Stocken, P., 1998. "An Analysis of Stock Recommendations," Papers 204, Princeton, Woodrow Wilson School - Public and International Affairs.
  9. Kartik, Navin & Ottaviani, Marco & Squintani, Francesco, 2007. "Credulity, lies, and costly talk," Journal of Economic Theory, Elsevier, vol. 134(1), pages 93-116, May.
  10. Li, Ming & Madarász, Kristóf, 2008. "When mandatory disclosure hurts: Expert advice and conflicting interests," Journal of Economic Theory, Elsevier, vol. 139(1), pages 47-74, March.
  11. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Marco Battaglini, 1999. "Multiple Referrals and Multidimensional Cheap Talk," Discussion Papers 1295, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Matthias Sutter, 2007. "Deception through telling the truth?! Experimental evidence from individuals and teams," Working Papers 2007-26, Faculty of Economics and Statistics, University of Innsbruck.
  14. Gilat Levy & Ronny Razin, 2007. "On the Limits of Communication in Multidimensional Cheap Talk: A Comment," Econometrica, Econometric Society, vol. 75(3), pages 885-893, 05.
  15. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  16. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
  17. Inderst, Roman & Ottaviani, Marco, 2009. "Misselling through agents," IMFS Working Paper Series 36, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
  18. Rajna Gibson & Carmen Tanner & Alexander F. Wagner, 2013. "Preferences for Truthfulness: Heterogeneity among and within Individuals," American Economic Review, American Economic Association, vol. 103(1), pages 532-48, February.
  19. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  20. Archishman Chakraborty & Rick Harbaugh, 2012. "Persuasive Puffery," Working Papers 2012-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  21. Yongmin Chen & Chuan He, 2011. "Paid Placement: Advertising and Search on the Internet," Economic Journal, Royal Economic Society, vol. 121(556), pages F309-F328, November.
  22. Navin Kartik, 2008. "Strategic Communication with Lying Costs," 2008 Meeting Papers 350, Society for Economic Dynamics.
  23. Roman Inderst & Marco Ottaviani, 2009. "Misselling through Agents," American Economic Review, American Economic Association, vol. 99(3), pages 883-908, June.
  24. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
  25. Archishman Chakraborty & Rick Harbaugh, 2006. "Persuasion by Cheap Talk," Working Papers 2006-10, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy, revised Oct 2009.
  26. Blume, Andreas, et al, 1998. "Experimental Evidence on the Evolution of Meaning of Messages in Sender-Receiver Games," American Economic Review, American Economic Association, vol. 88(5), pages 1323-40, December.
  27. Joseph Tao-yi Wang & Michael Spezio & Colin F. Camerer, 2010. "Pinocchio's Pupil: Using Eyetracking and Pupil Dilation to Understand Truth Telling and Deception in Sender-Receiver Games," American Economic Review, American Economic Association, vol. 100(3), pages 984-1007, June.
  28. Abbink, Klaus & Sadrieh, Abdolkarim, 2009. "The pleasure of being nasty," Economics Letters, Elsevier, vol. 105(3), pages 306-308, December.
  29. Archishman Chakraborty & Rick Harbaugh, 2004. "Comparative Cheap Talk," Working Papers 2004-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  30. Armstrong, Mark & Zhou, Jidong, 2011. "Paying for prominence," MPRA Paper 30529, University Library of Munich, Germany.
  31. Roman Inderst & Marco Ottaviani, 2012. "Competition through Commissions and Kickbacks," American Economic Review, American Economic Association, vol. 102(2), pages 780-809, April.
  32. Cai, Hongbin & Wang, Joseph Tao-Yi, 2006. "Overcommunication in strategic information transmission games," Games and Economic Behavior, Elsevier, vol. 56(1), pages 7-36, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

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.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iuk:wpaper:2012-02. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rick Harbaugh).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.