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Evolving influence: Mitigating extreme conflicts of interest in advisory relationships

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  • Boleslavsky, Raphael
  • Lewis, Tracy R.

Abstract

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.

Suggested Citation

  • Boleslavsky, Raphael & Lewis, Tracy R., 2016. "Evolving influence: Mitigating extreme conflicts of interest in advisory relationships," Games and Economic Behavior, Elsevier, vol. 98(C), pages 110-134.
    • Handle: RePEc:eee:gamebe:v:98:y:2016:i:c:p:110-134
    DOI: 10.1016/j.geb.2016.05.005
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    3. Zeinab Aboutalebi & Ayush Pant, 2021. "Believe ... and you are there. On Self-Confidence and Feedback," Working Papers 64, Ashoka University, Department of Economics.

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    More about this item

    Keywords

    Advocacy; Multi-period delegation; Long-term advisory relationship; Influence;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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