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Competing influence

Author

Listed:
  • Enrico Sette

    () (Bank of Italy, Economics, Research and International Relations area)

Abstract

This paper investigates the incentives of experts competing to influence decision making. Competition for influence is shown to have an ambiguous effect on truthtelling incentives and a decision maker might be better off relying on one source of information only. This result has important implications for organizational design: the paper shows that delegation and favoritism can arise as a way to promote the correct flow of information within an organization. Delegation can lead to stronger truthtelling incentives than communication and it can be optimal when the importance of the decision is intermediate or high. Favoritism, consisting in biasing the competition for influence in favour of one expert, can further increase truthtelling incentives.

Suggested Citation

  • Enrico Sette, 2008. "Competing influence," Temi di discussione (Economic working papers) 693, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_693_08
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    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2008/2008-0693/en_tema_693.pdf
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    More about this item

    Keywords

    reputation; competition; delegation; favoritism;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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