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Will truth out?—An advisor’s quest to appear competent

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  • Klein, Nicolas
  • Mylovanov, Tymofiy

Abstract

We study a dynamic career-concerns environment with an agent who has incentives to appear competent. It is well known that dynamic career concerns create incentives for an agent to be conservative and to tailor his reports towards a commonly held prior opinion. The existing models, however, have focused on short time horizons. We show that, for long time horizons, there exist countervailing incentives for the agent to report his true opinion. In particular, if the agent is sufficiently patient, the time horizon is sufficiently long given the agent’s patience, and the quality of the competent expert is high enough given the time horizon and the discount factor, the beneficial long-term incentives overwhelm any harmful myopic ones, and the incentive problem vanishes.

Suggested Citation

  • Klein, Nicolas & Mylovanov, Tymofiy, 2017. "Will truth out?—An advisor’s quest to appear competent," Journal of Mathematical Economics, Elsevier, vol. 72(C), pages 112-121.
    • Handle: RePEc:eee:mateco:v:72:y:2017:i:c:p:112-121
    DOI: 10.1016/j.jmateco.2017.07.005
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    Cited by:

    1. Aleksei Smirnov & Egor Starkov, 2019. "Timing of predictions in dynamic cheap talk: experts vs. quacks," ECON - Working Papers 334, Department of Economics - University of Zurich.
    2. Bonatti, Alessandro & Hörner, Johannes, 2017. "Career concerns with exponential learning," Theoretical Economics, Econometric Society, vol. 12(1), January.
    3. Benjamin Davies, 2022. "Why do experts give simple advice?," Papers 2209.11710, arXiv.org.
    4. Schottmüller, Christoph, 2019. "Too good to be truthful: Why competent advisers are fired," Journal of Economic Theory, Elsevier, vol. 181(C), pages 333-360.
    5. Pavesi, Filippo & Scotti, Massimo, 2022. "Good lies," European Economic Review, Elsevier, vol. 141(C).
      • Filippo Pavesi & Massimo Scotti, 2019. "Good Lies," Working Paper Series 39, Economics Discipline Group, UTS Business School, University of Technology, Sydney.

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