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American Economic Review Vol. 104 No. 5 2014

How Sharing Information Can Garble Experts' Advice

Matthew Elliott1; Benjamin Golub2; Andrei Kirilenko3

1 Division of Humanities and Social Sciences 228-77, Caltech, Pasadena, CA 91125 (e-mail: ) · 2 Society of Fellows and Department of Economics, Littauer Center, Harvard, Cambridge, MA 02138 (e-mail: ) · 3 MIT Sloan School of Management, 50 Memorial Drive, Cambridge, MA 02142 (e-mail: )

Abstract

We model the strategic provision of advice in environments where a principal's optimal action depends on an unobserved, binary state of interest. Experts receive signals about the state and each recommends an action. The principal and all experts dislike making errors in their decision and recommendations, respectively, but may have different costs of different errors. Is it in the principal's interest to let experts share information? Although sharing improves experts' ability to avoid errors, we identify a simple environment in which any principal, regardless of how he trades off the different errors, is worse off if he permits information sharing.

DOI
10.1257/aer.104.5.463
Volume
104
Issue
5
Pages
463-468
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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