This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Professional Advice: The Theory of Reputational Cheap Talk

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Marco Ottaviani (London Business School)
Peter Norman Sorensen (Institute of Economics, University of Copenhagen)

Additional information is available for the following registered author(s):

Abstract

Professional experts offer advice with the objective of appearing well informed. Their ability is evaluated on the basis of the advice given and of the realized state of the world. This situation is modeled as a reputational cheap-talk game in which the expert receives a signal of continuously varying intensity with ability-dependent precision about a continuum of states. Despite allowing an arbitrarily rich message space, at most two messages are sent in equilibrium. The expert can only credibly transmit the direction but not the intensity of the information possessed. Equilibrium advice is then systematically less informative than under truthtelling.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.ku.dk/Research/Publications/pink/2002/0205.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 02-05.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 43 pages
Date of creation: Jul 2002
Date of revision:
Handle: RePEc:kud:kuiedp:0205

Contact details of provider:
Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark
Phone: (+45) 35 32 26 26
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk
More information through EDIRC

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: (Henriette Aabo Hansen).

Related research
Keywords: reputation; cheap talk; advice; herding;

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
G20 - Financial Economics - - Financial Institutions and Services - - - General
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Blackwell Publishing, vol. 66(1), pages 183-98, January. [Downloadable!] (restricted)
  2. Welch, Ivo, 2000. "Herding among security analysts," Journal of Financial Economics, Elsevier, vol. 58(3), pages 369-396, December. [Downloadable!] (restricted)
  3. Adam Brandenburger & Ben Polak, 1996. "When Managers Cover Their Posteriors: Making the Decisions the Market Wants to See," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 523-541, Autumn. [Downloadable!] (restricted)
  4. Paul Heidhues & Johan Lagerlöf, 2000. "Hiding Information in Electoral Competition," CIG Working Papers FS IV 00-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Feb 2002. [Downloadable!]
    Other versions:
  5. Avery, Christopher N. & Chevalier, Judith A., 1999. "Herding over the career," Economics Letters, Elsevier, vol. 63(3), pages 327-333, June. [Downloadable!] (restricted)
  6. Effinger, Matthias R. & Polborn, Mattias K., 2001. "Herding and anti-herding: A model of reputational differentiation," European Economic Review, Elsevier, vol. 45(3), pages 385-403, March. [Downloadable!] (restricted)
  7. Lohmann, Susanne, 1994. "Information Aggregation through Costly Political Action," American Economic Review, American Economic Association, vol. 84(3), pages 518-30, June. [Downloadable!] (restricted)
  8. Lones Smith & Peter Sorensen, 2000. "Pathological Outcomes of Observational Learning," Econometrica, Econometric Society, vol. 68(2), pages 371-398, March.
    Other versions:
  9. John R. Graham, 1999. "Herding among Investment Newsletters: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(1), pages 237-268, 02. [Downloadable!] (restricted)
  10. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-34, December. [Downloadable!] (restricted)
  11. Ottaviani, Marco & Sorensen, Peter, 2001. "Information aggregation in debate: who should speak first?," Journal of Public Economics, Elsevier, vol. 81(3), pages 393-421, September. [Downloadable!] (restricted)
  12. Seidmann, Daniel J., 1990. "Effective cheap talk with conflicting interests," Journal of Economic Theory, Elsevier, vol. 50(2), pages 445-458, April. [Downloadable!] (restricted)
  13. Jerry R. Green & Nancy L. Stokey, 1980. "A Two-Person Game of Information Transmission," Discussion Papers 418, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  14. Ehrbeck, Tilman & Waldmann, Robert, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 21-40, February. [Downloadable!] (restricted)
  15. Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
    Other versions:
  16. Gul, Faruk & Lundholm, Russell, 1995. "Endogenous Timing and the Clustering of Agents' Decisions," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1039-66, October. [Downloadable!] (restricted)
  17. Marco Battaglini, 2002. "Multiple Referrals and Multidimensional Cheap Talk," Econometrica, Econometric Society, vol. 70(4), pages 1379-1401, July. [Downloadable!] (restricted)
    Other versions:
  18. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
  19. Judith Chevalier & Glenn Ellison, 1999. "Career Concerns Of Mutual Fund Managers," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 389-432, May. [Downloadable!] (restricted)
    Other versions:
  20. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-79, June.
    Other versions:
  21. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October. [Downloadable!] (restricted)
  22. Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 7(1), pages 97-124. [Downloadable!] (restricted)
  23. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn. [Downloadable!] (restricted)
    Other versions:
  24. Piccione, Michele & Tan, Guofu, 1996. "A Simple Model of Expert and Non-Expert Bidding in First-Price Auctions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 501-515, August. [Downloadable!] (restricted)
    Other versions:
  25. Lamont, Owen A., 2002. "Macroeconomic forecasts and microeconomic forecasters," Journal of Economic Behavior & Organization, Elsevier, vol. 48(3), pages 265-280, July. [Downloadable!] (restricted)
  26. Benabou, Roland & Laroque, Guy, 1992. "Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 921-58, August. [Downloadable!] (restricted)
    Other versions:
  27. Holmstrom, Bengt & Ricart i Costa, Joan, 1986. "Managerial Incentives and Capital Management," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 835-60, November. [Downloadable!] (restricted)
  28. Ewerhart, Christian & Schmitz, Patrick W., 2000. ""Yes men", integrity, and the optimal design of incentive contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 43(1), pages 115-125, September. [Downloadable!] (restricted)
    Other versions:
  29. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November. [Downloadable!] (restricted)
  30. Marco Ottaviani & Peter Norman Sorensen, 2001. "The Strategy of Professional Forecasting," Discussion Papers 01-09, University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
  31. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October. [Downloadable!] (restricted)
  32. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March. [Downloadable!] (restricted)
  33. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Blackwell Publishing, vol. 52(4), pages 557-73, October. [Downloadable!] (restricted)
  34. David S. Scharfstein & Jeremy C. Stein, 2000. "Herd Behavior and Investment: Reply," American Economic Review, American Economic Association, vol. 90(3), pages 705-706, June. [Downloadable!] (restricted)
  35. Marco Ottaviani & Peter Sorensen, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June. [Downloadable!] (restricted)
  36. Marco Ottaviani & Andrea Prat, 2001. "The Value of Public Information in Monopoly," Econometrica, Econometric Society, vol. 69(6), pages 1673-1683, November. [Downloadable!] (restricted)
    Other versions:
  37. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August. [Downloadable!] (restricted)
  38. Biglaiser, Gary & Mezzetti, Claudio, 1997. "Politicians' decision making with re-election concerns," Journal of Public Economics, Elsevier, vol. 66(3), pages 425-447, December. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nicolas Houy & Lucie Ménager, 2005. "Communication, consensus and order. Who wants to speak first ?," Cahiers de la Maison des Sciences Economiques v05030, Université Panthéon-Sorbonne (Paris 1), revised Jan 2006. [Downloadable!]
    Other versions:
  2. Tsung-Sheng Tsai & Yasunari Tamada, 2004. "Allocation of Decision-Making Authority with Principal's Reputation Concerns," Econometric Society 2004 Far Eastern Meetings 701, Econometric Society. [Downloadable!]
Statistics
Access and download statistics

Did you know? Over 1000 institutions contribute their bibliographic data directly to this service.

This page was last updated on 2009-11-2.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.