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Credibility for Sale: the Effect of Disclosure on Information Acquisition and Transmission

We study the effect of disclosure on information acquisition and transmission in a dynamic reputation model. In each period, to make a report to a client, an expert chooses between conducting a costly investigation or channeling a message from an interest group. We show that not disclosing the source of the expert's report may increase the frequency of investigation by the expert. Nevertheless, it decreases the quality of the clients' decisions. We demonstrate that, however, when the importance of decisions vary across time, when the interest groups are long-lived, or when the expert's clientele is growing in her reputation, nondisclosure may improve the quality of the clients' decisions.

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File URL: http://alcor.concordia.ca/~mingli/research/manirep_repec.pdf
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Paper provided by Concordia University, Department of Economics in its series Working Papers with number 09008.

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Length: 36 pages
Date of creation: Feb 2009
Date of revision: Oct 2009
Handle: RePEc:crd:wpaper:09008
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  1. Sendhil Mullainathan & Andrei Shleifer, 2002. "Media Bias," NBER Working Papers 9295, National Bureau of Economic Research, Inc.
  2. Christopher Phelan, 2001. "Public trust and government betrayal," Staff Report 283, Federal Reserve Bank of Minneapolis.
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  13. Beatriz Mariano, 2008. "Do reputational concerns lead to reliable ratings?," LSE Research Online Documents on Economics 24433, London School of Economics and Political Science, LSE Library.
  14. Martin W. Cripps & George J. Mailath & Larry Samuelson, 2002. "Imperfect Monitoring and Impermanent Reputations," PIER Working Paper Archive 03-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 30 May 2003.
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  20. Matthew Gentzkow & Jesse M. Shapiro, 2006. "Media Bias and Reputation," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 280-316, April.
  21. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
  22. Stephen Morris, 1999. "Political Correctness," Cowles Foundation Discussion Papers 1242, Cowles Foundation for Research in Economics, Yale University.
  23. Joel Sobel, 1985. "A Theory of Credibility," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 557-573.
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  25. Gabszewicz, Jean J. & Laussel, Dider & Sonnac, Nathalie, 2001. "Press advertising and the ascent of the 'Pensee Unique'," European Economic Review, Elsevier, vol. 45(4-6), pages 641-651, May.
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  27. Bourjade, Sylvain & Jullien, Bruno, 2004. "Expertise and Bias in Decision Making," MPRA Paper 7251, University Library of Munich, Germany, revised Jan 2007.
  28. Jeong-Yoo Kim, 1996. "Cheap Talk and Reputation in Repeated Pretrial Negotiation," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 787-802, Winter.
  29. Wei Li, 2007. "Changing One's Mind when the Facts Change: Incentives of Experts and the Design of Reporting Protocols," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1175-1194.
  30. In-Uck Park, 2005. "Cheap-Talk Referrals of Differentiated Experts in Repeated Relationships," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 391-411, Summer.
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  32. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
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