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An offer you can refuse: The effect of transparency with endogenous conflict of interest

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  • Kartal, Melis
  • Tremewan, James

Abstract

We study the effects of transparency on information transmission and decision making theoretically and experimentally. We develop a model in which a decision maker seeks advice from a better-informed adviser whose advice might be swayed by financial incentives. Transparency enables the decision maker to learn whether or not the adviser accepted such an incentive, for example from an “interested” third party. Prior theoretical and experimental research mostly found that transparency is ineffective or harmful to decision makers. Our model predicts that transparency is never harmful and, depending on equilibrium selection, may improve the accuracy of decision makers. In our experiment transparency does indeed improve accuracy, especially if it is mandatory.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:pubeco:v:161:y:2018:i:c:p:44-55
    DOI: 10.1016/j.jpubeco.2018.04.003
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    Cited by:

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    2. Felix Gottschalk, 2021. "Regulating Markets with Advice: An Experimental Study," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(1), pages 1-31, February.
    3. De Moragas, Antoni-Italo, 2022. "Disclosing decision makers’ private interests," European Economic Review, Elsevier, vol. 150(C).

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    More about this item

    Keywords

    Experimental game theory; Strategic information transmission; Transparency; Conflict of interest; Lobbying;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • 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

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