IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Reputation, Cheap Talk and Delegation

Listed author(s):
  • Amal Sanyal
  • Kunal Sengupta

A decision maker is contemplating an action whose outcome is state dependent. She has a ‘prior’ over the states of the world and before choosing an action, she can consult an ‘expert’. We model the communication game between the decision maker and the expert as a ‘cheap-talk’ game. Expert quality however is heterogenous. Some can obtain informative signals while the others can not. Since an expert known to be informed earns a rent in the future, uninformed experts would like to disguise as informed.We show that such concern for future reputation imposes severe constraints on the possibility of beneficial communication. Decision makers who can benefit from such communication are characterized in terms of the relevant parameters which include the prior of the decision makers and the cost of mistaken decisions. Next we address the issue of delegation. The questions that we ask are which decision makers choose to delegate, and to whom they delegate. In situations involving public goods, we characterize the decision makers who will strictly prefer to delegate, and show that when delegation occurs, the delegate is necessarily more extreme than the original decision maker in terms of her prior.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://econwpa.repec.org/eps/game/papers/0501/0501001.pdf
Download Restriction: no

Paper provided by EconWPA in its series Game Theory and Information with number 0501001.

as
in new window

Length: 20 pages
Date of creation: 10 Jan 2005
Handle: RePEc:wpa:wuwpga:0501001
Note: Type of Document - pdf; pages: 20
Contact details of provider: Web page: http://econwpa.repec.org

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 551-584.
  2. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
  3. Ramon Faulí-Oller & Efe A. Ok & Ignacio Ortuño-Ortín, 2003. "Delegation and polarization of platforms in political competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 22(2), pages 289-309, 09.
  4. Roland Benabou & Guy Laroque, 1992. "Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 921-958.
  5. Caillaud, B. & Tirole, J., 1999. "Party governance and ideological bias," European Economic Review, Elsevier, vol. 43(4-6), pages 779-789, April.
  6. Schultz, Christian, 2002. "Policy biases with voters' uncertainty about the economy and the government," European Economic Review, Elsevier, vol. 46(3), pages 487-506, March.
  7. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-479, June.
  8. Martinelli, Cesar & Matsui, Akihiko, 2002. " Policy Reversals and Electoral Competition with Privately Informed Parties," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(1), pages 39-61.
  9. David Spector, 2000. "Rational Debate and One-Dimensional Conflict," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 181-200.
  10. Harrington, Joseph Jr., 1992. "The role of party reputation in the formation of policy," Journal of Public Economics, Elsevier, vol. 49(1), pages 107-121, October.
  11. Abhijit Banerjee & Rohini Somanathan, 2001. "A Simple Model of Voice," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 189-227.
  12. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
  13. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 169-182.
  14. Joel Sobel, 1985. "A Theory of Credibility," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 557-573.
  15. Martinelli, Cesar, 2001. "Elections with Privately Informed Parties and Voters," Public Choice, Springer, vol. 108(1-2), pages 147-167, July.
  16. Bengt Holmstrom & Joan Ricart i Costa, 1986. "Managerial Incentives and Capital Management," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 835-860.
  17. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpga:0501001. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.