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Expert advice for amateurs

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  • Lai, Ernest K.

Abstract

A biased, perfectly informed expert advises a partially and privately informed decision maker using cheap-talk message. The decision maker can tell whether the state is “high” or “low” relative to a private threshold that divides the unit-interval state space into two subintervals. The decision maker's response to the expert's advice becomes less sensitive under the former's own information. In response, the expert provides advice that is considered more biased, relative to the case when decision maker is uninformed. For some types of decision maker, this negative, strategic effect of their own information outweighs its direct, positive effect—being informed makes them worse off. Examples show, however, that evaluated before the realization of her type, the opportunity to access information is always beneficial to the decision maker when the expert has moderate bias.

Suggested Citation

  • Lai, Ernest K., 2014. "Expert advice for amateurs," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 1-16.
  • Handle: RePEc:eee:jeborg:v:103:y:2014:i:c:p:1-16 DOI: 10.1016/j.jebo.2014.03.023
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Junichiro Ishida & Takashi Shimizu, 2016. "Cheap talk with an informed receiver," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(1), pages 61-72, April.
    2. Ying Chen & Sidartha Gordon, 2015. "Information transmission in nested sender–receiver games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(3), pages 543-569, April.
    3. Altmann, Steffen & Falk, Armin & Grunewald, Andreas, 2013. "Incentives and Information as Driving Forces of Default Effects," IZA Discussion Papers 7610, Institute for the Study of Labor (IZA).
    4. Shadmehr, Mehdi, 2015. "Simple decision rules in small groups: Collegial rule vs. rotational rule," Journal of Economic Behavior & Organization, Elsevier, vol. 113(C), pages 51-63.
    5. Ispano, Alessandro, 2016. "Persuasion and receiver’s news," Economics Letters, Elsevier, vol. 141(C), pages 60-63.
    6. Grillo, Edoardo, 2016. "The hidden cost of raising voters’ expectations: Reference dependence and politicians’ credibility," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 126-143.

    More about this item

    Keywords

    Amateur; Cheap talk; Expert; Informed decision maker;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • 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

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