IDEAS home Printed from https://ideas.repec.org/p/kse/dpaper/5.html
   My bibliography  Save this paper

Contracts for Experts with Opposing Interests

Author

Listed:
  • Tymofiy Mylovanov

    (Penn State University)

  • Andriy Zapechelnyuk

    (University of Bonn and KSE-KEI)

Abstract

We study the problem of optimal contract design in an environment with an uninformed decision maker and two perfectly informed experts. We characterize optimal contracts and observe that consulting two experts rather than one is always beneficial; this is so even if the bias of a second expert is arbitrary large and this expert would have no value in a cheap talk environment. We also provide conditions under which these contracts implement the first best outcome; our sufficient condition is weaker than the conditions in the literature on the environments without commitment. In order to derive optimal contracts, we prove a Òconstant-threatÓ result that states that one can restrict attention to contracts in which the action implemented in case of a disagreement among the experts is independent of their reports. A particular implication of this result is that an optimal contract is constant for a large set of expertsÕ preferences and hence is robust to mistakes in their specification.

Suggested Citation

  • Tymofiy Mylovanov & Andriy Zapechelnyuk, 2008. "Contracts for Experts with Opposing Interests," Discussion Papers 5, Kyiv School of Economics, revised Feb 2010.
    • Handle: RePEc:kse:dpaper:5
    Note: Under review in RAND Journal of Economics
    as

    Download full text from publisher

    File URL: http://repec.kse.org.ua/pdf/KSE_dp5.pdf
    File Function: Revised version, February 2010
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marco Battaglini, 2002. "Multiple Referrals and Multidimensional Cheap Talk," Econometrica, Econometric Society, vol. 70(4), pages 1379-1401, July.
    2. Vijay Krishna & John Morgan, 2001. "A Model of Expertise," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 747-775.
    3. , & ,, 2008. "Multi-sender cheap talk with restricted state spaces," Theoretical Economics, Econometric Society, vol. 3(1), March.
    4. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    5. Austen-Smith David, 1993. "Interested Experts and Policy Advice: Multiple Referrals under Open Rule," Games and Economic Behavior, Elsevier, vol. 5(1), pages 3-43, January.
    6. 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, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Koessler, Frédéric & Martimort, David, 2012. "Optimal delegation with multi-dimensional decisions," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1850-1881.
    2. Minozzi, William & Woon, Jonathan, 2019. "The limited value of a second opinion: Competition and exaggeration in experimental cheap talk games," Games and Economic Behavior, Elsevier, vol. 117(C), pages 144-162.
    3. Mylovanov, Tymofiy & Zapechelnyuk, Andriy, 2013. "Decision rules revealing commonly known events," Economics Letters, Elsevier, vol. 119(1), pages 8-10.
    4. Persson, Petra, 2018. "Attention manipulation and information overload," Behavioural Public Policy, Cambridge University Press, vol. 2(1), pages 78-106, May.
    5. Gordon Rausser & Leo Simon & Jinhua Zhao, 2015. "Rational exaggeration and counter-exaggeration in information aggregation games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(1), pages 109-146, May.
    6. Esra E. Bayindir & Mehmet Y. Gurdal & Ayca Ozdogan & Ismail Saglam, 2020. "Cheap Talk Games with Two-Senders and Different Modes of Communication," Games, MDPI, vol. 11(2), pages 1-22, April.
    7. Meyer, Margaret & Moreno de Barreda, Inés & Nafziger, Julia, 2019. "Robustness of full revelation in multisender cheap talk," Theoretical Economics, Econometric Society, vol. 14(4), November.
    8. Archishman Chakraborty & Rick Harbaugh, 2010. "Persuasion by Cheap Talk," American Economic Review, American Economic Association, vol. 100(5), pages 2361-2382, December.
      • 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.
    9. Murali Agastya & Parimal Kanti Bag & Indranil Chakraborty, 2014. "Communication and authority with a partially informed expert," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 176-197, March.
    10. Ambrus, Attila & Lu, Shih En, 2014. "Almost fully revealing cheap talk with imperfectly informed senders," Games and Economic Behavior, Elsevier, vol. 88(C), pages 174-189.
    11. Irene Valsecchi, 2013. "The expert problem: a survey," Economics of Governance, Springer, vol. 14(4), pages 303-331, November.
    12. Gurdal, Mehmet Y. & Ozdogan, Ayca & Saglam, Ismail, 2013. "Cheap talk with simultaneous versus sequential messages," MPRA Paper 45727, University Library of Munich, Germany.
    13. Miura, Shintaro, 2014. "Multidimensional cheap talk with sequential messages," Games and Economic Behavior, Elsevier, vol. 87(C), pages 419-441.
    14. Lai, Ernest K. & Lim, Wooyoung & Wang, Joseph Tao-yi, 2015. "An experimental analysis of multidimensional cheap talk," Games and Economic Behavior, Elsevier, vol. 91(C), pages 114-144.
    15. Vaccari, Federico, 2023. "Competition in costly talk," Journal of Economic Theory, Elsevier, vol. 213(C).
    16. Chan, Jimmy & Suen, Wing, 2009. "Media as watchdogs: The role of news media in electoral competition," European Economic Review, Elsevier, vol. 53(7), pages 799-814, October.
    17. Lai, Ernest K., 2014. "Expert advice for amateurs," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 1-16.
    18. Kawamura, Kohei, 2008. "Communication for Public Goods," SIRE Discussion Papers 2008-25, Scottish Institute for Research in Economics (SIRE).
    19. Golosov, Mikhail & Skreta, Vasiliki & Tsyvinski, Aleh & Wilson, Andrea, 2014. "Dynamic strategic information transmission," Journal of Economic Theory, Elsevier, vol. 151(C), pages 304-341.
    20. Au, Pak Hung & Kawai, Keiichi, 2020. "Competitive information disclosure by multiple senders," Games and Economic Behavior, Elsevier, vol. 119(C), pages 56-78.

    More about this item

    Keywords

    information; optimal contracts; experts; constant-threat principle;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kse:dpaper:5. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Iryna Sobetska (email available below). General contact details of provider: https://edirc.repec.org/data/ksecoua.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.