Information and expertise

Decision-making crucially relies on information. There are many cases in which those in charge of making decisions face a relative scarcity of relevant information with respect to other agents who instead possess it (i.e., experts). With information being available but asymmetrically distributed, a problem arises about how effectively it can be transmitted and used. In particular, when an expert is known (or simply believed) to face conflicts of interest and the decision maker cannot use contracts to align incentives, a problem of credibility arises with respect to the information conveyed by the expert. This chapter offers a selected review of the theoretical literature on strategic information transmission which studies the issue of how much information can be credibly conveyed by an informed but biased agent in the absence of explicit incentives. Given the vast size of this literature, the contribution of this review is to identify four broad institutional aspects that are deemed to be key: (i) the extent to which delegation can be superior to communication; (ii) the role that experts’ competition plays in helping the decision maker elicit information; (iii) the effectiveness of reputation as an implicit incentive that can align incentives; (iv) the role played by networks. We outline the role of these key institutional aspects in influencing information revelation with the scope of providing a platform for the design of expert markets and institutions.