IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Professional Advice: The Theory of Reputational Cheap Talk

  • Marco Ottaviani

    (London Business School)

  • Peter Norman Sorensen

    (Institute of Economics, University of Copenhagen)

Professional experts offer advice with the objective of appearing well informed. Their ability is evaluated on the basis of the advice given and of the realized state of the world. This situation is modeled as a reputational cheap-talk game in which the expert receives a signal of continuously varying intensity with ability-dependent precision about a continuum of states. Despite allowing an arbitrarily rich message space, at most two messages are sent in equilibrium. The expert can only credibly transmit the direction but not the intensity of the information possessed. Equilibrium advice is then systematically less informative than under truthtelling.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.ku.dk/english/research/publications/wp/2002/0205.pdf/
Download Restriction: no

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 02-05.

as
in new window

Length: 43 pages
Date of creation: Jul 2002
Date of revision:
Handle: RePEc:kud:kuiedp:0205
Contact details of provider: Postal:
Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark

Phone: (+45) 35 32 30 10
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Tilman Ehrbeck & Robert Waldmann, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 21-40.
  2. Smith, L. & Sorensen, P., 1996. "Pathological Outcomes of Observational Learning," Working papers 96-19, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Zitzewitz, Eric, 2001. "Measuring Herding and Exaggeration by Equity Analysts and Other Opinion Sellers," Research Papers 1802, Stanford University, Graduate School of Business.
  4. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 183-198.
  5. Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Working Papers 154, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics.
  6. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  7. Piccione, Michele & Tan, Guofu, 1996. "A Simple Model of Expert and Non-Expert Bidding in First-Price Auctions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 501-515, August.
  8. Paul Heidhues & Johan Lagerlöf, 2000. "Hiding Information in Electoral Competition," CIG Working Papers FS IV 00-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Feb 2002.
  9. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "The strategy of professional forecasting," Journal of Financial Economics, Elsevier, vol. 81(2), pages 441-466, August.
  10. Marco Ottaviani & Andrea Prat, 2001. "The Value of Public Information in Monopoly," Econometrica, Econometric Society, vol. 69(6), pages 1673-1683, November.
  11. Seidmann, Daniel J., 1990. "Effective cheap talk with conflicting interests," Journal of Economic Theory, Elsevier, vol. 50(2), pages 445-458, April.
  12. Gul, Faruk & Lundholm, Russell, 1995. "Endogenous Timing and the Clustering of Agents' Decisions," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1039-66, October.
  13. Peter Sorensen & Marco Ottaviani, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June.
  14. Ewerhart, Christian & Schmitz, Patrick W., 2000. ""Yes men", integrity, and the optimal design of incentive contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 43(1), pages 115-125, September.
  15. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-34, December.
  16. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  17. Owen Lamont, 1995. "Macroeconomics Forecasts and Microeconomic Forecasters," NBER Working Papers 5284, National Bureau of Economic Research, Inc.
  18. Marco Battaglini, 2002. "Multiple Referrals and Multidimensional Cheap Talk," Econometrica, Econometric Society, vol. 70(4), pages 1379-1401, July.
  19. Ottaviani, Marco & Sorensen, Peter, 2001. "Information aggregation in debate: who should speak first?," Journal of Public Economics, Elsevier, vol. 81(3), pages 393-421, September.
  20. Effinger, Matthias R. & Polborn, Mattias K., 2001. "Herding and anti-herding: A model of reputational differentiation," European Economic Review, Elsevier, vol. 45(3), pages 385-403, March.
  21. Harrison Hong & Jeffrey D. Kubik & Amit Solomon, 2000. "Security Analysts' Career Concerns and Herding of Earnings Forecasts," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 121-144, Spring.
  22. Avery, Christopher N. & Chevalier, Judith A., 1999. "Herding over the career," Economics Letters, Elsevier, vol. 63(3), pages 327-333, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:0205. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.