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Experts, Conflicts of Interest, and the Controversial Role of Reputation

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  • Filippo Pavesi

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  • Massimo Scotti

Abstract

This paper studies the impact of reputation on the reporting strategy of experts that face conflicts of interest. The framework we propose applies to different settings involv- ing decision makers that rely on experts for making informed decisions, such as financial analysts and goverment agencies. We show that reputation has a non-monotonic effect on the degree of information revelation. In general, truthful revelation is more likely to occur when there is more uncertainty on an expert's ability. Furthermore, above a certain threshold, an increase in reputation always makes truthful revelation more difficult to achieve. Our results shed light on the relationship between the institutional features of the reporting environment and informational efficiency.

Suggested Citation

  • Filippo Pavesi & Massimo Scotti, 2010. "Experts, Conflicts of Interest, and the Controversial Role of Reputation," Working Papers 185, University of Milano-Bicocca, Department of Economics, revised Apr 2010.
  • Handle: RePEc:mib:wpaper:185
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