Opinions as Incentives
We study costs and benefits of differences of opinion between an adviser and a decision maker. Even when they share the same underlying preferences over decisions, a difference of opinion about payoff-relevant information leads to strategic information acquisition and transmission. A decision maker faces a fundamental trade-off: a greater difference of opinion increases an adviser's incentives to acquire information but exacerbates the strategic disclosure of any information that is acquired. Nevertheless, when choosing from a rich pool of opinion types, it is optimal for a decision maker to select an adviser with some difference of opinion. Centralization of authority is essential to harness these incentive gains since delegation to the adviser can discourage effort. (c) 2009 by The University of Chicago. All rights reserved.
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- 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.
- Steven Shavell, 1994. "Acquisition and Disclosure of Information Prior to Sale," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 20-36, Spring.
- Hao Li & Wing Suen, 2004. "Delegating Decisions to Experts," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S311-S335, February.
- Hao Li, 2001. "A Theory of Conservatism," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 617-636, June.
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