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Expertise and Bias in Decision Making

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Author Info
Bourjade, Sylvain
Jullien, Bruno

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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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Publisher 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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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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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.:
  1. 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). [Downloadable!]
    Other versions:
  2. Marcoul, Philippe, 2003. "A Theory of Advice Based on Information Search Incentives," Staff General Research Papers 10357, Iowa State University, Department of Economics. [Downloadable!]
  3. 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.
    Other versions:
  4. Hyun Song Shin, 1998. "Adversarial and Inquisitorial Procedures in Arbitration," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 378-405, Summer. [Downloadable!] (restricted)
  5. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA. [Downloadable!]
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  6. 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. [Downloadable!]
  7. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April. [Downloadable!] (restricted)
    Other versions:
  8. 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.
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  9. Marco Ottaviani & Peter Norman Sorensen, 2006. "Reputational Cheap Talk," RAND Journal of Economics, The RAND Corporation, vol. 37(1), pages 155-175, Spring.
  10. BIAIS, Bruno & PEROTTI, Enrico, 2005. "Entrepreneurs and New Ideas," IDEI Working Papers 347, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  11. Laffont, Jean-Jacques & Tirole, Jean, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1089-127, November. [Downloadable!] (restricted)
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  12. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November. [Downloadable!] (restricted)
  13. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. 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. [Downloadable!]
  2. 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. [Downloadable!]
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