Expert advice for amateurs

Ernest K. Lai

Journal of Economic Behavior & Organization, 2014, vol. 103, issue C, 1-16

Abstract: A biased, perfectly informed expert advises a partially and privately informed decision maker using cheap-talk message. The decision maker can tell whether the state is “high” or “low” relative to a private threshold that divides the unit-interval state space into two subintervals. The decision maker's response to the expert's advice becomes less sensitive under the former's own information. In response, the expert provides advice that is considered more biased, relative to the case when decision maker is uninformed. For some types of decision maker, this negative, strategic effect of their own information outweighs its direct, positive effect—being informed makes them worse off. Examples show, however, that evaluated before the realization of her type, the opportunity to access information is always beneficial to the decision maker when the expert has moderate bias.

Keywords: Amateur; Cheap talk; Expert; Informed decision maker (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:103:y:2014:i:c:p:1-16

DOI: 10.1016/j.jebo.2014.03.023

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