Professional advice

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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
OriginalsprogEngelsk
TidsskriftJournal of Economic Theory
Vol/bind126
Udgave nummer1
Sider (fra-til)120-142
ISSN0022-0531
DOI
StatusUdgivet - 2006

Bibliografisk note

JEL Classification: D82, D83, D72

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