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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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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. Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Anderson, Simon P & McLaren, John, 2010. "Media Mergers and Media Bias with Rational Consumers," CEPR Discussion Papers 7768, C.E.P.R. Discussion Papers.
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  16. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  17. Sendhil Mullainathan & Andrei Shleifer, 2002. "Media Bias," NBER Working Papers 9295, National Bureau of Economic Research, Inc.
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  28. Bourjade, Sylvain & Jullien, Bruno, 2004. "Expertise and Bias in Decision Making," MPRA Paper 7251, University Library of Munich, Germany, revised Jan 2007.
  29. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
  30. Dino Gerardi & Leeat Yariv, 2008. "Costly Expertise," American Economic Review, American Economic Association, vol. 98(2), pages 187-93, May.
  31. 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.
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