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Multiple Advisors with Reputation

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  • Junghun Cho

Abstract

This paper examines reputation, the belief of a decision maker about types of advisors, in a two period cheap talk model where the decision maker obtains messages from two advisors. The decision maker believes that an advisor can be one of two types - an advisor who is biased towards suggesting any particular advice (bad advisor) or an advisor who has the same preferences as the decision maker (good advisor). I assume that each advisor perfectly knows the type of the other advisor, but his signal about the state of the world is imperfect. Strong reputational concern makes the good advisor sometimes tell a lie in the first period regardless of the type of the other advisor. It is shown that the presence of the other advisor does affect the message sent by an advisor. The good advisor has a greater incentive to tell a lie when he knows that the other advisor is bad rather than good. If each type of advisor considers his second period sufficiently important, it is better for the decision maker to have a single advisor.

Suggested Citation

  • Junghun Cho, 2006. "Multiple Advisors with Reputation," CERGE-EI Working Papers wp314, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp314
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    File URL: http://www.cerge-ei.cz/pdf/wp/Wp314.pdf
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    References listed on IDEAS

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    1. Battaglini Marco, 2004. "Policy Advice with Imperfectly Informed Experts," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-34, April.
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    8. In-Uck Park, 2005. "Cheap-Talk Referrals of Differentiated Experts in Repeated Relationships," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 391-411, Summer.
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    11. Olszewski, Wojciech, 2004. "Informal communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 180-200, August.
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    Cited by:

    1. Junghun Cho, 2008. "Sequential Cheap Talk from Advisors with Reputation," CERGE-EI Working Papers wp352, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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    More about this item

    Keywords

    Reputation; Cheap talk;

    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

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