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Opinion as Incentives

Author

Listed:
  • Che, Yeon-Koo
  • Kartik, Navin

Abstract

We study a model where a decision maker (DM) must select an adviser to advise her about an unknown state of the world. There is a pool of available advisers who all have the same underlying preferences as the DM; they differ, however, in their prior beliefs about the state, which we interpret as differences of opinion. We derive atradeoff faced by the DM: an adviser with a greater difference of opinion has greater incentives to acquire information, but reveals less of any information she acquires, via strategic disclosure. Nevertheless, it is optimal to choose an adviser with at least some difference of opinion. The analysis reveals two novel incentives for an agent to acquire information: a ``persuasion'' motive and a motive to ``avoid prejudice.'' Delegation is costly for the DM because it eliminates both of these incentives. We also study the relationship between difference of opinion and difference of preference.

Suggested Citation

  • Che, Yeon-Koo & Kartik, Navin, 2006. "Opinion as Incentives," MPRA Paper 6094, University Library of Munich, Germany, revised 15 Nov 2007.
    • Handle: RePEc:pra:mprapa:6094
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    References listed on IDEAS

    as
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    5. Steven Shavell, 1994. "Acquisition and Disclosure of Information Prior to Sale," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 20-36, Spring.
    6. Hao Li & Wing Suen, 2004. "Delegating Decisions to Experts," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 311-335, February.
    7. Dezsö Szalay, 2005. "The Economics of Clear Advice and Extreme Options," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 1173-1198.
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    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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