The Power of Referential Advice

Steven Callander, Nicolas Lambert and Niko Matouschek

Journal of Political Economy, 2021, vol. 129, issue 11, 3073 - 3140

Abstract: Expert advice often extends beyond a simple recommendation, including information about alternative options. To explore the role of this referential advice, we enrich the expert’s informational advantage in a canonical model of communication with hard information. We show that when constructed just right, referential advice dissuades the decision maker from choosing options other than the recommendation, thereby making the recommendation itself more persuasive. We identify an equilibrium in which, with probability 1, the expert is strictly better off providing referential advice than she is in any equilibrium in which she provides a recommendation alone.

Date: 2021
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