Professional Advice

Marco Ottaviani and Peter Sørensen

Game Theory and Information from University Library of Munich, Germany

Abstract: Professional experts offer advice with the objective of appearing well informed. Their ability is evaluated on the basis of the advice given and the realized state of the world. We model this situation as a reputational cheap-talk game with continuous signal, state, and ability type spaces. Despite allowing a message space as rich as the signal space, at best two messages are sent in the most informative equilibrium. The expert can credibly transmit only the direction but not the intensity of the information possessed. Equilibrium forecasts are then systematically less precise than under truthtelling, and learning on the expert's ability is slow.

Keywords: reputation; cheap talk; forecasting; advice; herding (search for similar items in EconPapers)
JEL-codes: D72 D82 D83 G20 J30 (search for similar items in EconPapers)
Date: 1999-06-25
Note: Type of Document - Postscript, Acrobat PDF; prepared on PC with SciWord 3.0, MiKTeX and dvips; to print on HP/PostScript/A4paper;
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Citations: View citations in EconPapers (21)

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Journal Article: Professional advice (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpga:9906003

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