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Welfare and competition in expert advice markets

Author

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  • Albertazzi, Andrea
  • Ploner, Matteo
  • Vaccari, Federico

Abstract

We perform a controlled experiment to study the welfare effects of competition within a strategic communication environment. Two equally informed senders with conflicting interests can misreport information at a cost. We compare a treatment where only one sender communicates to a treatment where both senders privately communicate with a decision-maker, all else equal. Data show that competition fails to improve decision-making and harms senders' welfare. As a result, the overall market welfare is significantly lower under competition. In both treatments, senders reveal less information, and decision-makers obtain less than the most informative equilibria predict. However, they still reveal and get more information compared to other equilibria.

Suggested Citation

  • Albertazzi, Andrea & Ploner, Matteo & Vaccari, Federico, 2024. "Welfare and competition in expert advice markets," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 74-103.
    • Handle: RePEc:eee:jeborg:v:219:y:2024:i:c:p:74-103
    DOI: 10.1016/j.jebo.2024.01.011
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    More about this item

    Keywords

    Experiment; Welfare; Multiple senders; Competition; Sender-receiver games;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D60 - Microeconomics - - Welfare Economics - - - General

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