When second opinions hurt: A model of expert advice under career concerns

Yaozhou Franklin Liu and Amal Sanyal

Journal of Economic Behavior & Organization, 2012, vol. 84, issue 1, 1-16

Abstract: We develop a reputational cheap talk model where the principal can cancel an action initially started on the advice of an expert if she gets some unfavorable interim news. But if the status quo is reinstated, the principal is unable to verify the true state of the world. In the model, experts want to appear smart and we find that the possibility of canceling the action encourages less well informed experts to recommend it more often. We then show that gaining access to interim news as well as improving the quality of an existing one can both reduce the principal's welfare. The model implies that delegating the decision rights to another person with different preferences can be used as a commitment device by the principal and might improve her welfare.

Keywords: Career concerns; Reputational cheap-talk; Signaling game (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: When second opinions hurt: a model of expert advice under career concerns (2010)
Working Paper: When Second Opinions Hurt: A Model of Expert Advice under Career Conce rns (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:84:y:2012:i:1:p:1-16

DOI: 10.1016/j.jebo.2012.07.006

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