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Expertise and Bias in Decision Making

Author

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  • Bourjade, Sylvain
  • Jullien, Bruno

Abstract

In this paper, we develop a model of a decision maker using an expert to obtain information. The expert is biased toward some favoured decision but cares also about its reputation on the market for experts. We then analyse the corresponding decision game depending on the nature of the informational linkage with the market. In the case where the expert is biased in favour of the status quo, the final decision is always biased in the same direction. Moreover, it is better to rely on experts biased against the status quo. We also show that it is optimal to publically disclose the expert report. Finally, we prove that the intuitive results that hiring an honest inside expert raises the outside expert's incentives to report truthfully holds when reports are public but not when they are secret.

Suggested Citation

  • Bourjade, Sylvain & Jullien, Bruno, 2004. "Expertise and Bias in Decision Making," MPRA Paper 7251, University Library of Munich, Germany, revised Jan 2007.
  • Handle: RePEc:pra:mprapa:7251
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    File URL: https://mpra.ub.uni-muenchen.de/7251/1/MPRA_paper_7251.pdf
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    References listed on IDEAS

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    1. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2006. "Efficiency Gains from Mergers," Chapters,in: European Merger Control, chapter 3 Edward Elgar Publishing.
    2. repec:hhs:iuiwop:543 is not listed on IDEAS
    3. Kai-Uwe Kühn, 2002. "Reforming European Merger Review: Targeting Problem Areas in Policy Outcomes," Journal of Industry, Competition and Trade, Springer, vol. 2(4), pages 311-364, December.
    4. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
    5. Hyun Song Shin, 1998. "Adversarial and Inquisitorial Procedures in Arbitration," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 378-405, Summer.
    6. Jean-Jacques Laffont & Jean Tirole, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1089-1127.
    7. Aldo Gonzalez, 2004. "Antitrust Enforcement and the Design of Disclosure Rules. An Application to Merger Control," Econometric Society 2004 Latin American Meetings 199, Econometric Society.
    8. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October.
    9. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
    10. Klaas J. Beniers, 2004. "On the Composition of Committees," Journal of Law, Economics, and Organization, Oxford University Press, vol. 20(2), pages 353-378, October.
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    12. Marcoul, Philippe, 2003. "A Theory of Advice Based on Information Search Incentives," Staff General Research Papers Archive 10357, Iowa State University, Department of Economics.
    13. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
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    Citations

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    Cited by:

    1. Li, Ming & Tymofiy Mylovanov, 2009. "Credibility for Sale: the Effect of Disclosure on Information Acquisition and Transmission," Working Papers 09008, Concordia University, Department of Economics, revised Oct 2009.
    2. Sylvain Bourjade & Bruno Jullien, 2011. "The roles of reputation and transparency on the behavior of biased experts," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 575-594, September.
    3. Iossa, Elisabetta & Jullien, Bruno, 2007. "The Market for Lawyers: The Value of Information on the Quality of Legal Services," IDEI Working Papers 485, Institut d'Économie Industrielle (IDEI), Toulouse.

    More about this item

    Keywords

    Experts; Bias; Reputation; Merger Control;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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