Experts, Conflicts of Interest, and the Controversial Role of Reputation

Filippo Pavesi and Massimo Scotti

No 185, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This paper studies the impact of reputation on the reporting strategy of experts that face conflicts of interest. The framework we propose applies to different settings involv- ing decision makers that rely on experts for making informed decisions, such as financial analysts and goverment agencies. We show that reputation has a non-monotonic effect on the degree of information revelation. In general, truthful revelation is more likely to occur when there is more uncertainty on an expert's ability. Furthermore, above a certain threshold, an increase in reputation always makes truthful revelation more difficult to achieve. Our results shed light on the relationship between the institutional features of the reporting environment and informational efficiency.

Pages: 32 pages
Date: 2010-04, Revised 2010-04
New Economics Papers: this item is included in nep-bec and nep-cta
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:185

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