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

Contracts for Experts with Opposing Interests

Contents:

Author Info

  • 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.

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://repec.kse.org.ua/pdf/KSE_dp5.pdf
File Function: Revised version, February 2010
Download Restriction: no

Bibliographic Info

Paper provided by Kyiv School of Economics in its series Discussion Papers with number 5.

as in new window
Length:
Date of creation: Jan 2008
Date of revision: Feb 2010
Handle: RePEc:kse:dpaper:5

Note: Under review in RAND Journal of Economics
Contact details of provider:
Postal: 13 Yakira Str, 04119 Kyiv
Phone: (38-044)492-8012
Fax: (38-044)492-8011
Email:
Web page: http://www.kse.org.ua/
More information through EDIRC

Related research

Keywords: information; optimal contracts; experts; constant-threat principle;

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. Marco Battaglini, 1999. "Multiple Referrals and Multidimensional Cheap Talk," Discussion Papers 1295, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Working Papers 154, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  3. 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.
  4. Ambrus, Attila & Takahashi, Satoru, 2008. "Multi-sender cheap talk with restricted state spaces," Theoretical Economics, Econometric Society, vol. 3(1), March.
  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.
Full references (including those not matched with items on IDEAS)

Citations

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:kse:dpaper:5. 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: (Olena Nizalova).

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.