Professional advice |
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Authors: | Marco Ottaviani Peter Norman Sørensen |
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Institution: | a Economics Subject Area, London Business School, Sussex Place, Regent's Park, London NW1 4SA, UK b Institute of Economics, University of Copenhagen, Studiestræde 6, DK-1455 Copenhagen K, Denmark |
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Abstract: | This paper studies strategic communication by an expert who is concerned about appearing to be well informed. The expert is assumed to observe a private signal with a simple and particularly tractable (multiplicative linear) structure. The quality of the expert's information is evaluated on the basis of the advice given and the realized state of the world. In equilibrium of this reputational cheap-talk game, no more than two messages are effectively reported. The model is extended to consider sequential communication by experts with conditionally independent signals. In the long run, learning is incomplete and herd behavior arises. |
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Keywords: | D72 D82 D83 G20 J30 |
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