The Supply of Information in an Emotional Setting

Dionysius Glycopantis and Charitini Stavropoulou

CESifo Economic Studies, 2011, vol. 57, issue 4, 740-762

Abstract: Advances in the field of economics and psychology have contributed greatly to the understanding of the supply of information when it affects the emotions and consequently the decisions made by two parties. Yet, these studies assume that the parties have identical utilities. In this article, focusing on the doctor--patient interaction, we relax the perfect agency assumption, introduce the agent's effort in supplying information, and analyze the two parties' interdependent decisions under asymmetric information. We show that when the supplier of information fails to understand the receiver's preferences the latter will disregard completely the recommendation. We consider the policy recommendations and welfare implications of the model. (JEL codes: C72, D8, I1) Copyright The Author 2011. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oup.com, Oxford University Press.

Date: 2011
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