When Second Opinions Hurt: A Model of Expert Advice under Career Conce rns
AbstractWe augment the standard career concerns model by introducing (i) an action that blocks the information about the true state of the world and (ii) the possibility that the principal might reverse her initial action after receiving an interim news. In this model, the principal's decisions as well as the expert's message endogenously determine the observability of the states and consequently, the assessment of the expert's ability by the principal. We show that having access to better interim news could reduce the welfare of the principal due to its strategic eff ect on the expert's recommendation. We also discuss the implication of the results for possible delegation of decision making to another person with di fferent preference parameters.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Sydney, School of Economics in its series Working Papers with number 2010-08.
Date of creation: Dec 2010
Date of revision:
Career Concerns; Reputational Cheaptalk; Signaling Game;
Other versions of this item:
- Liu, Yaozhou Franklin & Sanyal, Amal, 2012. "When second opinions hurt: A model of expert advice under career concerns," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 1-16.
- Liu, Yaozhou Franklin & Sanyal, Amal, 2010. "When second opinions hurt: a model of expert advice under career concerns," MPRA Paper 27176, University Library of Munich, Germany.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
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.:
- Holmstrom, Bengt & Ricart i Costa, Joan, 1986.
"Managerial Incentives and Capital Management,"
The Quarterly Journal of Economics,
MIT Press, vol. 101(4), pages 835-60, November.
- Marco Battaglini, 2002.
"Multiple Referrals and Multidimensional Cheap Talk,"
Econometric Society, vol. 70(4), pages 1379-1401, July.
- Marco Battaglini, 1999. "Multiple Referrals and Multidimensional Cheap Talk," Discussion Papers 1295, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Marco Battaglini, 2000. "Multiple Referrals and Multidimensional Cheap Talk," Econometric Society World Congress 2000 Contributed Papers 1557, Econometric Society.
- Wei Li, 2007. "Changing One's Mind when the Facts Change: Incentives of Experts and the Design of Reporting Protocols," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1175-1194.
- Stephen Morris, 1999.
Cowles Foundation Discussion Papers
1242, Cowles Foundation for Research in Economics, Yale University.
- Bengt Holmstrom, 1999.
"Managerial Incentive Problems: A Dynamic Perspective,"
NBER Working Papers
6875, National Bureau of Economic Research, Inc.
- Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
- Effinger, Matthias R. & Polborn, Mattias K., 2001. "Herding and anti-herding: A model of reputational differentiation," European Economic Review, Elsevier, vol. 45(3), pages 385-403, March.
- Bauke Visser & Otto H Swank, 2007.
"On Committees of Experts,"
The Quarterly Journal of Economics,
MIT Press, vol. 122(1), pages 337-372, 02.
- Vijay Krishna & John Morgan, 1999.
"A Model of Expertise,"
154, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
- Benabou, R. & Laroque, G., 1989.
"Using Privileged Information To Manipulate Markets: Insiders, Gurus, And Credibility,"
513, Massachusetts Institute of Technology (MIT), Department of Economics.
- Benabou, Roland & Laroque, Guy, 1992. "Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 921-58, August.
- Benabou, R. & Laroque, G., 1988. "Using Privileged Information To Manipulate Markets: Insiders, Gurus And Credibility," Papers 19, Princeton, Woodrow Wilson School - Discussion Paper.
- V. Crawford & J. Sobel, 2010.
"Strategic Information Transmission,"
Levine's Working Paper Archive
544, David K. Levine.
- Sumon Majumdar & Sharun W. Mukand, 2004.
Discussion Papers Series, Department of Economics, Tufts University
0407, Department of Economics, Tufts University.
- Scharfstein, David S & Stein, Jeremy C, 1990.
"Herd Behavior and Investment,"
American Economic Review,
American Economic Association, vol. 80(3), pages 465-79, June.
- Ottaviani, Marco & Sorensen, Peter Norman, 2006.
Journal of Economic Theory,
Elsevier, vol. 126(1), pages 120-142, January.
- Marco Ottaviani & Peter Norman Sørensen, 2006. "Reputational cheap talk," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 155-175, 03.
- Ottaviani, Marco & Sorensen, Peter, 2001. "Information aggregation in debate: who should speak first?," Journal of Public Economics, Elsevier, vol. 81(3), pages 393-421, September.
- Gilat Levy, 2007. "Decision Making in Committees: Transparency, Reputation, and Voting Rules," American Economic Review, American Economic Association, vol. 97(1), pages 150-168, March.
- Andrea Prat, 2005.
"The Wrong Kind of Transparency,"
American Economic Review,
American Economic Association, vol. 95(3), pages 862-877, June.
- Prat, Andrea, 2003. "The Wrong Kind of Transparency," CEPR Discussion Papers 3859, C.E.P.R. Discussion Papers.
- Andrea Prat, 2004. "The wrong kind of transparency," LSE Research Online Documents on Economics 24712, London School of Economics and Political Science, LSE Library.
- Andrea Prat, 2002. "The wrong kind of transparency," LSE Research Online Documents on Economics 3679, London School of Economics and Political Science, LSE Library.
- Andrea Prat, 2002. "The Wrong Kind of Transparency," STICERD - Theoretical Economics Paper Series 439, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Levy, Gilat, 2004. "Anti-herding and strategic consultation," European Economic Review, Elsevier, vol. 48(3), pages 503-525, June.
- Suurmond, Guido & Swank, Otto H. & Visser, Bauke, 2004. "On the bad reputation of reputational concerns," Journal of Public Economics, Elsevier, vol. 88(12), pages 2817-2838, December.
- FU, Qiang & LI, Ming, 2010. "Policy Making with Reputation Concerns," Cahiers de recherche 09-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Zwiebel, Jeffrey, 1995. "Corporate Conservatism and Relative Compensation," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 1-25, February.
- Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
- Fenghua Song & Anjan V. Thakor, 2006. "Information Control, Career Concerns, and Corporate Governance," Journal of Finance, American Finance Association, vol. 61(4), pages 1845-1896, 08.
- Fu, Qiang & Li, Ming, 2014. "Reputation-concerned policy makers and institutional status quo bias," Journal of Public Economics, Elsevier, vol. 110(C), pages 15-25.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vanessa Holcombe).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.