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Biased Recommendations

Author

Listed:
  • Wonsuk Chung

    (Department of Economics, Indiana University)

  • Rick Harbaugh

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

We develop and experimentally test a discrete choice model of an expert who recommends one of multiple actions to a decision maker who might take no action. Consistent with the recent theoretical literature on cheap talk recommendations, we find that recommendations are "persuasive" in that they reduce the chance that the decision maker takes no action, that recommendations for an action the expert benefits more from are "discounted", that lack of "transparency" about expert incentives undermines communication by both biased and unbiased experts, and that experts "pander" to the perceived preferences of the decision maker.

Suggested Citation

  • Wonsuk Chung & Rick Harbaugh, 2012. "Biased Recommendations," Working Papers 2012-02, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    • Handle: RePEc:iuk:wpaper:2012-02
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    File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2012-02-chung-harbaugh.pdf
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    References listed on IDEAS

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    2. Sobel, Joel, 2013. "Ten possible experiments on communication and deception," University of California at San Diego, Economics Working Paper Series qt53w1f0w4, Department of Economics, UC San Diego.
    3. Sobel, Joel, 2013. "Ten possible experiments on communication and deception," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 408-413.

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    More about this item

    Keywords

    cheap talk; discrete choice; deception; persuasion; discounting; transparency; pandering;
    All these keywords.

    JEL classification:

    • L0 - Industrial Organization - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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