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Evolving influence: Mitigating extreme conflicts of interest in advisory relationships

Listed author(s):
  • Boleslavsky, Raphael
  • Lewis, Tracy R.
Registered author(s):

    An advocate for a special interest provides advice to a planner, who subsequently makes a sequence of decisions. The advocate is interested only in advancing his cause and will distort his advice to manipulate the planner's choices. Each time she acts the planner observes the result, providing a signal that corroborates or contradicts the advocate's recommendation. Without commitment, no influential communication takes place. With commitment, the planner can exploit the information that is revealed over time to mitigate the advocate's incentive to lie. We derive the optimal mechanism for eliciting advice, characterizing the evolution of the advocate's influence. We also consider costly information acquisition, the use of transfers, and a noisy private signal.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0899825616300409
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    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 98 (2016)
    Issue (Month): C ()
    Pages: 110-134

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    Handle: RePEc:eee:gamebe:v:98:y:2016:i:c:p:110-134
    DOI: 10.1016/j.geb.2016.05.005
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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