Professional advice
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Professional advice. / Ottaviani, Marco; Sørensen, Peter Norman.
In: Journal of Economic Theory, Vol. 126, No. 1, 2006, p. 120-142.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Professional advice
AU - Ottaviani, Marco
AU - Sørensen, Peter Norman
N1 - JEL Classification: D82, D83, D72
PY - 2006
Y1 - 2006
N2 - This paper studies strategic communication by an expert who is concerned about appearing to be well informed. The expert is assumed to observe a private signal with a simple and particularly tractable (multiplicative linear) structure. The quality of the expert's information is evaluated on the basis of the advice given and the realized state of the world. In equilibrium of this reputational cheap-talk game, no more than two messages are effectively reported. The model is extended to consider sequential communication by experts with conditionally independent signals. In the long run, learning is incomplete and herd behavior arises
AB - This paper studies strategic communication by an expert who is concerned about appearing to be well informed. The expert is assumed to observe a private signal with a simple and particularly tractable (multiplicative linear) structure. The quality of the expert's information is evaluated on the basis of the advice given and the realized state of the world. In equilibrium of this reputational cheap-talk game, no more than two messages are effectively reported. The model is extended to consider sequential communication by experts with conditionally independent signals. In the long run, learning is incomplete and herd behavior arises
KW - Faculty of Social Sciences
KW - reputation
KW - cheap talk
KW - herding
U2 - 10.1016/j.jet.2004.08.005
DO - 10.1016/j.jet.2004.08.005
M3 - Journal article
VL - 126
SP - 120
EP - 142
JO - Journal of Economic Theory
JF - Journal of Economic Theory
SN - 0022-0531
IS - 1
ER -
ID: 314080