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Faculty of Economics

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Elliott, M., Golub, B. and Kirilenko, A.

How sharing information can garble expert's advice

American Economic Review Papers and Proceedings

Vol. 104(5) pp. 463-468 (2014)

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.

JEL Codes: D82, D83

Author links: Matthew Elliott  

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