Relying on the Information of Interested Parties
We investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information. We find that, if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties, competition may be unnecessary to achieve this result. If the decisionmaker is unsophisticated or not well informed, competition is not generally sufficient. If the interested parties' interests are sufficiently opposed, however, or if the decisionmaker is seeking to advance the parties' welfare, then competition can reduce or even eliminate the decisionmaker's need for prior knowledge about the relevant variables and for strategic sophistication. In other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking.
Volume (Year): 17 (1986)
Issue (Month): 1 (Spring)
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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.:
- Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
- Kreps, David M & Wilson, Robert, 1982.
Econometric Society, vol. 50(4), pages 863-94, July.
- Crawford, Vincent P & Sobel, Joel, 1982.
"Strategic Information Transmission,"
Econometric Society, vol. 50(6), pages 1431-51, November.
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