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Should the Flatterers be Avoided?


  • Nicolas Klein

    (University of Bonn)

  • Tymofiy Mylovanov

    (Penn State University)


We analyze a dynamic career concerns game between an expert and a decision maker. In each period, the decision maker has the option of obtaining cheap-talk advice from the expert, who is merely interested in his continued employment. The expert's quality is initially unknown to both parties. The incentive problem is that the expert might attempt to avoid appearing uninformed by concealing his true opinion if it contradicts the predominant view. Nevertheless, if a competent expert never makes mistakes, the fully revealing first-best outcome can be implemented provided the time horizon is sufficiently long. For shorter time horizons, the optimal equilibrium in this case features a grace period during which the expert accumulates some private information about his quality.

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  • Nicolas Klein & Tymofiy Mylovanov, 2011. "Should the Flatterers be Avoided?," 2011 Meeting Papers 1273, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:1273

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    References listed on IDEAS

    1. Nicolas Klein & Sven Rady, 2011. "Negatively Correlated Bandits," Review of Economic Studies, Oxford University Press, vol. 78(2), pages 693-732.
    2. Gerardi, Dino & Maestri, Lucas, 2012. "A principal-agent model of sequential testing," Theoretical Economics, Econometric Society, vol. 7(3), September.
    3. Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, vol. 9(2), pages 185-202, October.
    4. Klein, Nicolas, 2013. "Strategic learning in teams," Games and Economic Behavior, Elsevier, vol. 82(C), pages 636-657.
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