IDEAS home Printed from https://ideas.repec.org/a/aea/aejmic/v1y2009i2p220-42.html
   My bibliography  Save this article

Corruptible Advice

Author

Listed:
  • Erik Durbin
  • Ganesh Iyer

Abstract

We study information transmission to a decision maker from an advisor who values a reputation for incorruptibility in the presence of a third party who offers unobservable payments/bribes. While it is common to ascribe negative effects to such bribes, we show that given reputational concerns, bribes can play a positive role by restoring truthful communication that would otherwise not occur. Thus, while bribes can influence self-interested bad advisors to lie about the unfavorable state, they can also be used to motivate good advisors who care more about the decision maker's utility to truthfully report the favorable state. (JEL D82, D83)

Suggested Citation

  • Erik Durbin & Ganesh Iyer, 2009. "Corruptible Advice," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 220-242, August.
    • Handle: RePEc:aea:aejmic:v:1:y:2009:i:2:p:220-42
    Note: DOI: 10.1257/mic.1.2.220
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mic.1.2.220
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Roland Benabou & Guy Laroque, 1992. "Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 921-958.
    2. Morgan, John & Stocken, Phillip C, 2003. "An Analysis of Stock Recommendations," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 183-203, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kartal, Melis & Tremewan, James, 2018. "An offer you can refuse: The effect of transparency with endogenous conflict of interest," Journal of Public Economics, Elsevier, vol. 161(C), pages 44-55.
    2. Patrick Bolton & Xavier Freixas & Joel Shapiro, 2012. "The Credit Ratings Game," Journal of Finance, American Finance Association, vol. 67(1), pages 85-112, February.
    3. Pedro M. Gardete & Yakov Bart, 2018. "Tailored Cheap Talk: The Effects of Privacy Policy on Ad Content and Market Outcomes," Marketing Science, INFORMS, vol. 37(5), pages 733-752, September.
    4. Shubhranshu Singh, 2017. "Competition in Corruptible Markets," Marketing Science, INFORMS, vol. 36(3), pages 361-381, May.
    5. Yiangos Papanastasiou, 2020. "Fake News Propagation and Detection: A Sequential Model," Management Science, INFORMS, vol. 66(5), pages 1826-1846, May.
    6. Tinglong Dai & Shubhranshu Singh, 2020. "Conspicuous by Its Absence: Diagnostic Expert Testing Under Uncertainty," Marketing Science, INFORMS, vol. 39(3), pages 540-563, May.
    7. Di Maggio, Marco, 2009. "Accountability and Cheap Talk," MPRA Paper 18652, University Library of Munich, Germany.
    8. Dmitri Kuksov & Chenxi Liao, 2019. "Opinion Leaders and Product Variety," Marketing Science, INFORMS, vol. 38(5), pages 812-834, September.
    9. Mariano, Beatriz, 2012. "Market power and reputational concerns in the ratings industry," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1616-1626.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Ming & Madarász, Kristóf, 2008. "When mandatory disclosure hurts: Expert advice and conflicting interests," Journal of Economic Theory, Elsevier, vol. 139(1), pages 47-74, March.
    2. Murali Agastya & Parimal Kanti Bag & Indranil Chakraborty, 2015. "Proximate preferences and almost full revelation in the Crawford–Sobel game," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 201-212, October.
    3. Alessandro Acquisti, 2014. "Inducing Customers to Try New Goods," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(2), pages 131-146, March.
    4. Patrick Bolton & Xavier Freixas & Joel Shapiro, 2012. "The Credit Ratings Game," Journal of Finance, American Finance Association, vol. 67(1), pages 85-112, February.
    5. , & , & ,, 2008. "Credible ratings," Theoretical Economics, Econometric Society, vol. 3(3), September.
    6. Forges, Françoise & Horst, Ulrich, 2018. "Sender–receiver games with cooperation," Journal of Mathematical Economics, Elsevier, vol. 76(C), pages 52-61.
    7. Vincent P. Crawford, 2003. "Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions," American Economic Review, American Economic Association, vol. 93(1), pages 133-149, March.
    8. Lai, Ernest K., 2014. "Expert advice for amateurs," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 1-16.
    9. Jordi Blanes, 2003. "Credibility and Cheap Talk of Securities Analysts:Theory and Evidence," FMG Discussion Papers dp472, Financial Markets Group.
    10. Chen, Mark A. & Marquez, Robert, 2009. "Regulating securities analysts," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 259-283, April.
    11. Kim, Kyungmin & Pogach, Jonathan, 2014. "Honesty vs. advocacy," Journal of Economic Behavior & Organization, Elsevier, vol. 105(C), pages 51-74.
    12. Alp Atakan & Levent Kockesen & Elif Kubilay, 2017. "Optimal Delegation of Sequential Decisions: The Role of Communication and Reputation," Koç University-TUSIAD Economic Research Forum Working Papers 1701, Koc University-TUSIAD Economic Research Forum.
    13. Saltuk Ozerturk, 2007. "Stock recommendation of an analyst who trades on own account," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 768-785, September.
    14. Travis Dyer & Eunjee Kim, 2021. "Anonymous Equity Research," Journal of Accounting Research, Wiley Blackwell, vol. 59(2), pages 575-611, May.
    15. Jindapon, Paan & Oyarzun, Carlos, 2013. "Persuasive communication when the sender's incentives are uncertain," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 111-125.
    16. Atakan, Alp & Koçkesen, Levent & Kubilay, Elif, 2020. "Starting small to communicate," Games and Economic Behavior, Elsevier, vol. 121(C), pages 265-296.
    17. Skreta, Vasiliki & Veldkamp, Laura, 2009. "Ratings shopping and asset complexity: A theory of ratings inflation," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 678-695, July.
    18. Murali Agastya & Parimal Kanti Bag & Indranil Chakraborty, 2014. "Communication and authority with a partially informed expert," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 176-197, March.
    19. Cabrales, Antonio & Gottardi, Piero, 2014. "Markets for information: Of inefficient firewalls and efficient monopolies," Games and Economic Behavior, Elsevier, vol. 83(C), pages 24-44.
    20. Patrick Bolton & Xavier Freixas & Joel Shapiro, 2004. "Conflicts of Interest, Information Provision, and Competition in Banking," NBER Working Papers 10571, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmic:v:1:y:2009:i:2:p:220-42. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.