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Advisors with hidden motives

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  • Onuchic, Paula

Abstract

An advisor discloses evidence about an object to a potential buyer, who doesn't know the object's value or the profitability of its sale (the advisor's motives). I characterize optimal disclosure rules that balance two goals: maximizing the overall probability of sale, and steering sales from lower- to higher-profitability objects. I consider the implications of a regulation that forces the advisor to always reveal her motives to the buyer. I show that whether such policies induce the advisor to disclose more evidence about the object's value hinges on the curvature of the buyer's demand for the object. This result refines our understanding of effective regulation of advisor-advisee communication with and without commitment.

Suggested Citation

  • Onuchic, Paula, 2025. "Advisors with hidden motives," LSE Research Online Documents on Economics 129091, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:129091
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    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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