Li, Ming and Madarász, Kristóf (2008) When mandatory disclosure hurts: expert advice and conflicting interests. Journal of economic theory, 139 (1). pp. 47-74. ISSN 1095-7235
Abstract
We study the quality of advice that an informed and biased expert gives to an uninformed decision maker. We compare two scenarios: mandatory disclosure of the bias and nondisclosure, where information about the bias can only be revealed through cheap-talk. We find that in many scenarios nondisclosure allows for higher welfare for both parties. Hiding the bias allows for more precise communication for the more biased type and, if different types are biased in different directions, may allow for the same for the less biased type. We identify contexts where equilibrium revelation allows but mandatory disclosure prevents meaningful communication.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.elsevier.com/wps/find/journaldescriptio... |
| Additional Information: | © 2008 Elsevier |
| Uncontrolled Keywords: | cheap-talk, conflicts of interest, disclosure |
| Library of Congress subject classification: | H Social Sciences > HB Economic Theory |
| Journal of Economic Literature Classification System: | C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief |
| Sets: | Research centres and groups > Managerial Economics and Strategy Group Departments > Management Collections > Economists Online |
| Rights: | http://www.lse.ac.uk/library/rights/LSERO.htm |
| URL: | http://eprints.lse.ac.uk/37048/ |
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