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Advocacy and Dynamic Delegation

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Author Info

  • Ralph Boleslavsky

    (Department of Economics, University of Miami)

  • Tracy R. Lewis

    (Fuqua School of Business, Duke University)

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    Abstract

    An advocate for a special interest provides information to an uninformed planner for her to consider in making a sequence of important decisions. Although the advocate may have valuable information for the planner, it is is also known that the advocate is biased and will distort his advice if necessary to influence the planner's decision. Each time she repeats the problem, however, the planner learns about the accuracy of the advocate's recommendation, mitigating some of the advocate's incentive to act in a self-serving manner. We propose a theory of dynamic delegation to explain why planners do sometimes rely on information provided by advocates in making decisions. The interaction takes place in two phases, a communication phase, followed by a sequence of decisions and learning by the planner. We ∑first establish that the capability to delegate dynamically is a necessary condition for influential communication in this setting, and characterize the optimal dynamic delegation policy. Next, we show that a planner may prefer to consult an an advocate rather than a neutral adviser. Finally, we demonstrate how an advocate gains influence with a decision maker by making his preferences for actions unpredictable. Our results have implications for a variety of real world interactions including regulation, organization, and whistleblowing.

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    File URL: http://www.bus.miami.edu/_assets/files/faculty-and-research/academic-departments/eco/eco-working-papers/2011/WP2011-7.pdf
    File Function: First version, 2011
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    Bibliographic Info

    Paper provided by University of Miami, Department of Economics in its series Working Papers with number 2011-7.

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    Length: 53 pages
    Date of creation: 2011
    Date of revision:
    Publication status: Forthcoming: Under Review
    Handle: RePEc:mia:wpaper:2011-7

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    Web page: http://www.bus.miami.edu/faculty-and-research/academic-departments/economics/index.html
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    Related research

    Keywords: Delegation; Advocates; Cheap Talk;

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    References

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    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.:
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    1. Austen-Smith, David, 1994. "Strategic Transmission of Costly Information," Econometrica, Econometric Society, vol. 62(4), pages 955-63, July.
    2. Roland Strausz, 2006. "Interim Information in Long-Term Contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 1041-1067, December.
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    7. Leland, Hayne E, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality: Comment," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 485-89, December.
    8. Prat, Andrea, 2003. "The Wrong Kind of Transparency," CEPR Discussion Papers 3859, C.E.P.R. Discussion Papers.
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    16. Krishna, Vijay & Morgan, John, 2004. "Contracting for Information under Imperfect Commitment," Competition Policy Center, Working Paper Series qt4010c6w9, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    17. Marco Battaglini, 2002. "Multiple Referrals and Multidimensional Cheap Talk," Econometrica, Econometric Society, vol. 70(4), pages 1379-1401, July.
    18. Bull, Jesse & Watson, Joel, 2002. "Evidence Disclosure and Verfiability," University of California at San Diego, Economics Working Paper Series qt19p7z2gm, Department of Economics, UC San Diego.
    19. Archishman Chakraborty & Rick Harbaugh, 2010. "Persuasion by Cheap Talk," American Economic Review, American Economic Association, vol. 100(5), pages 2361-82, 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.
    20. Joel Watson & Jesse Bull, 2004. "Hard Evidence and Mechanism Design," Econometric Society 2004 North American Winter Meetings 433, Econometric Society.
    21. Heikki Rantakari, 2008. "Governing Adaptation -super-1," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1257-1285.
    22. Roman Inderst & Marco Ottaviani, 2009. "Misselling through Agents," American Economic Review, American Economic Association, vol. 99(3), pages 883-908, June.
    23. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-34, December.
    24. Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
    25. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
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