Avoiding Judgement by Recommending Inaction: Beliefs Manipulation and Reputational Concerns

Fanny Camara

No 14149, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: To evaluate an expert, the audience needs to compare the prediction of the expert with the realized outcome. But the prediction often affects the amount of public information about the outcome. The result is that the expert can manipulate her audience's ability to monitor the accuracy of her prediction. In a cheap-talk framework, we study how the endogenous nature of public information about the state of the world affects the information transmitted by an expert with reputational concerns. Our innovation consists in assuming that the precision of the public information on the realized state increases monotonically with the audience's interim beliefs. In addition to the conservatism bias found in the existing literature, our model predicts that (i) the expert is less communicative when the prior is low, and (ii) a higher initial reputation can make the expert less credible.(JEL D82, D83, L15)

JEL-codes: D82 D83 L15 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (1)

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