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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. Song Shin, H, 1996. "Adversarial and Inquisitorial Procedures in Arbitration," Economics Papers 124, Economics Group, Nuffield College, University of Oxford.
  2. repec:fth:iniesr:543 is not listed on IDEAS
  3. Kai-Uwe Kühn, 2002. "Reforming European Merger Review: Targeting Problem Areas in Policy Outcomes," Journal of Industry, Competition and Trade, Springer, vol. 2(4), pages 311-364, December.
  4. J. Farrell, 2010. "Meaning and Credibility in Cheap Talk Games," Levine's Working Paper Archive 533, David K. Levine.
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  6. Morgan, John & Stocken, Phillip C, 2003. " An Analysis of Stock Recommendations," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 183-203, Spring.
  7. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2000. "Efficiency Gains from Mergers," CIG Working Papers FS IV 00-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  8. Jean-Jacques Laffont & Jean Tirole, 1988. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," Working papers 506, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Biais, Bruno & Perotti, Enrico, 2008. "Entrepreneurs and New Ideas," IDEI Working Papers 347, Institut d'Économie Industrielle (IDEI), Toulouse, revised 0000.
  10. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
  11. Aldo Gonzalez, 2004. "Antitrust Enforcement and the Design of Disclosure Rules. An Application to Merger Control," Econometric Society 2004 Latin American Meetings 199, Econometric Society.
  12. Klaas J. Beniers, 2004. "On the Composition of Committees," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(2), pages 353-378, October.
  13. Marcoul, Philippe, 2003. "A Theory of Advice Based on Information Search Incentives," Staff General Research Papers 10357, Iowa State University, Department of Economics.
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Citations

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Cited by:
  1. 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.
  2. 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.
  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.

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