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Expertise and Bias in Decision Making

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  • Bourjade, Sylvain
  • Jullien, Bruno

Abstract

In this paper, we develop a model of a decision maker using an expert to obtain information. The expert is biased toward some favoured decision but cares also about its reputation on the market for experts. We then analyse the corresponding decision game depending on the nature of the informational linkage with the market. In the case where the expert is biased in favour of the status quo, the final decision is always biased in the same direction. Moreover, it is better to rely on experts biased against the status quo. We also show that it is optimal to publically disclose the expert report. Finally, we prove that the intuitive results that hiring an honest inside expert raises the outside expert's incentives to report truthfully holds when reports are public but not when they are secret.

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File URL: http://mpra.ub.uni-muenchen.de/7251/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7251.

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Date of creation: Nov 2004
Date of revision: Jan 2007
Handle: RePEc:pra:mprapa:7251

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Related research

Keywords: Experts; Bias; Reputation; Merger Control;

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References

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  1. Röller, Lars-Hendrik & Stennek, Johan & Verboven, Frank, 2000. "Efficiency Gains from Mergers," Working Paper Series 543, Research Institute of Industrial Economics.
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Citations

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Cited by:
  1. Sylvain Bourjade & Bruno Jullien, 2011. "The roles of reputation and transparency on the behavior of biased experts," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 575-594, 09.
  2. Elisabetta Iossa & Giuliana Palumbo, 2006. "Reputational Concerns and Bias in Arbitration," Economics and Finance Discussion Papers 06-09, Economics and Finance Section, School of Social Sciences, Brunel University.
  3. LI, Ming & MYLOVANOV, Tymofiy, 2010. "Credibility for Sale - The Effect of Disclosure on Information Acquisition and Transmission," Cahiers de recherche 08-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  4. Iossa, Elisabetta & Jullien, Bruno, 2007. "The Market for Lawyers: The Value of Information on the Quality of Legal Services," IDEI Working Papers 485, Institut d'Économie Industrielle (IDEI), Toulouse.

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