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.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Crawford, Vincent P & Sobel, Joel, 1982.
"Strategic Information Transmission,"
Econometric Society, vol. 50(6), pages 1431-51, November.
- Susanne Lohmann, 2010. "Information Aggregation Through Costly Political Action," Levine's Working Paper Archive 197, David K. Levine.
- Ewerhart, Christian & Schmitz, Patrick W., 2000.
""Yes Men," Integrity, and the Optimal Design of Incentive Contracts,"
12534, University Library of Munich, Germany.
- Ewerhart, Christian & Schmitz, Patrick W., 2000. ""Yes men", integrity, and the optimal design of incentive contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 43(1), pages 115-125, September.
- Vijay Krishna & John Morgan, 2001.
"A Model of Expertise,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 116(2), pages 747-775.
- Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Working Papers 154, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.
- Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Game Theory and Information 9902003, EconWPA.
- Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
- Zitzewitz, Eric, 2001. "Measuring Herding and Exaggeration by Equity Analysts and Other Opinion Sellers," Research Papers 1802, Stanford University, Graduate School of Business.
- Jeremy C. Stein & David S. Scharfstein, 2000. "Herd Behavior and Investment: Reply," American Economic Review, American Economic Association, vol. 90(3), pages 705-706, June.
- Joel Sobel, 1985. "A Theory of Credibility," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 557-573.
- Smith, L. & Sorensen, P., 1996.
"Pathological Outcomes of Observational Learning,"
115, Economics Group, Nuffield College, University of Oxford.
- Andrea Prat, 2002.
"The Wrong Kind of Transparency,"
STICERD - Theoretical Economics Paper Series
439, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Andrea Prat, 2004. "The wrong kind of transparency," LSE Research Online Documents on Economics 24712, London School of Economics and Political Science, LSE Library.
- Andrea Prat, 2002. "The wrong kind of transparency," LSE Research Online Documents on Economics 3679, London School of Economics and Political Science, LSE Library.
- Prat, Andrea, 2003. "The Wrong Kind of Transparency," CEPR Discussion Papers 3859, C.E.P.R. Discussion Papers.
- Harrison Hong & Jeffrey D. Kubik & Amit Solomon, 2000. "Security Analysts' Career Concerns and Herding of Earnings Forecasts," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 121-144, Spring.
- Watson, Joel, 1996. "Information Transmission When the Informed Party Is Confused," Games and Economic Behavior, Elsevier, vol. 12(1), pages 143-161, January.
- Tilman Ehrbeck & Robert Waldmann, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 21-40.
- Peter Sorensen & Marco Ottaviani, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June.
- Welch, Ivo, 2000. "Herding among security analysts," Journal of Financial Economics, Elsevier, vol. 58(3), pages 369-396, December.
- Wei Li, 2004. "Mind Changes in the Design of Reporting Protocols," Theory workshop papers 658612000000000085, UCLA Department of Economics.
- Adam Brandenburger & Ben Polak, 1996. "When Managers Cover Their Posteriors: Making the Decisions the Market Wants to See," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 523-541, Autumn.
- Olszewski, Wojciech, 2004. "Informal communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 180-200, August.
- Abhijit Banerjee & Rohini Somanathan, 2001. "A Simple Model of Voice," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 189-227.
- John R. Graham, 1999. "Herding among Investment Newsletters: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(1), pages 237-268, 02.
- Scharfstein, David S & Stein, Jeremy C, 1990.
"Herd Behavior and Investment,"
American Economic Review,
American Economic Association, vol. 80(3), pages 465-79, June.
- Lamont, Owen A., 2002.
"Macroeconomic forecasts and microeconomic forecasters,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 48(3), pages 265-280, July.
- Owen Lamont, 1995. "Macroeconomics Forecasts and Microeconomic Forecasters," NBER Working Papers 5284, National Bureau of Economic Research, Inc.
- Paul R. Milgrom, 1979.
"Good Nevs and Bad News: Representation Theorems and Applications,"
407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
- Seidmann, Daniel J., 1990. "Effective cheap talk with conflicting interests," Journal of Economic Theory, Elsevier, vol. 50(2), pages 445-458, April.
- Bengt Holmstrom & Joan Ricart i Costa, 1986. "Managerial Incentives and Capital Management," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 835-860.
- Judith Chevalier & Glenn Ellison, 1999. "Career Concerns of Mutual Fund Managers," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 389-432.
- Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
- Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 97-124.
- Anat R. Admati & Paul Pfleiderer, 2004. "Broadcasting Opinions with an Overconfident Sender," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 467-498, 05.
- Piccione, Michele & Tan, Guofu, 1996. "A Simple Model of Expert and Non-Expert Bidding in First-Price Auctions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 501-515, August.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010.
"A theory of Fads, Fashion, Custom and cultural change as informational Cascades,"
Levine's Working Paper Archive
1193, David K. Levine.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Lohmann, Susanne, 1994. "Information Aggregation through Costly Political Action," American Economic Review, American Economic Association, vol. 84(3), pages 518-30, June.
When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:126:y:2006:i:1:p:120-142. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.