Experts, conflicts of interest, and reputation for ability

Publication Type:
Journal Article
International Journal of Economic Theory, 2014, 10 (2), pp. 219 - 233
Issue Date:
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We analyze a model of cheap talk in which an expert who faces a conflict of interest with a decision maker is concerned about establishing a reputation for having accurate information. In this environment, an increase in reputation above a certain threshold always makes truthful revelation more difficult to achieve, since experts with greater reputation can more easily sway the beliefs of decision makers in a desired direction. Thus, higher levels of reputation exacerbate the incentives of biased experts to misreport their private information. Decision makers may therefore be better off consulting less reputable experts when conflicts are more pronounced. © IAET.
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