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Professional Advice

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  • Marco Ottaviani

    (University College London)

  • Peter Sorensen

    (University of Copenhagen)

Abstract

Professional experts offer advice with the objective of appearing well informed. Their ability is evaluated on the basis of the advice given and the realized state of the world. We model this situation as a reputational cheap-talk game with continuous signal, state, and ability type spaces. Despite allowing a message space as rich as the signal space, at best two messages are sent in the most informative equilibrium. The expert can credibly transmit only the direction but not the intensity of the information possessed. Equilibrium forecasts are then systematically less precise than under truthtelling, and learning on the expert's ability is slow.

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Bibliographic Info

Paper provided by EconWPA in its series Game Theory and Information with number 9906003.

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Date of creation: 25 Jun 1999
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Handle: RePEc:wpa:wuwpga:9906003

Note: Type of Document - Postscript, Acrobat PDF; prepared on PC with SciWord 3.0, MiKTeX and dvips; to print on HP/PostScript/A4paper;
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Web page: http://128.118.178.162

Related research

Keywords: reputation; cheap talk; forecasting; advice; herding;

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References

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