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The roles of reputation and transparency on the behavior of biased experts

Authors


  • We thank Denis Gromb, Elisabetta Iossa, Jean Tirole, Benjamin Hermalin, and two anonymous referees as well as participants in the seminars at Universitat Autonoma de Barcelona, Université Paris I, Université Lyon II, Université Paris Ouest–Nanterre, and Toulouse Business School, the IIOC 2005 Conference in Atlanta, the Sixth Journées Louis-André Gérard-Varet in Marseille, the EARIE 2008 Conference in Toulouse, the EEA-ESEM 2009 Conference in Barcelona, and the JEI 2010 in Madrid for helpful comments. An earlier version was titled “Expertise and Bias in Decision Making.” This work was partially written while Bourjade was a Marie Curie fellow at Universitat Autonoma de Barcelona. All remaining errors are ours.

Abstract

We analyze situations in which an expert is biased toward some decision but cares also about his reputation in the market for experts. The information the expert reveals decreases as his bias moves toward stronger preferences for the status quo. Surprisingly, revealing the intensity of the expert’s bias does not always improve the information he reveals in equilibrium. The presence of a second expert raises the first expert’s incentives to report truthfully when the market can identify the contribution of each expert, but reduces them when only the collective contribution is identified by the market.

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