Expertise and Bias in Decision Making
AbstractIn 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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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7251.
Date of creation: Nov 2004
Date of revision: Jan 2007
Experts; Bias; Reputation; Merger Control;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-23 (All new papers)
- NEP-CBE-2008-02-23 (Cognitive & Behavioural Economics)
- NEP-CTA-2008-02-23 (Contract Theory & Applications)
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