Expertise and Bias in Decision Making
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.
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|Date of revision:||Jan 2007|
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