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Abstract:

Theoretical Economics Paper
Strategic Consultation in the Presence of Career Concerns
Gilat Levy
November 2000
Paper No' TE/2000/404:
Full Paper (pdf)

Tags: reputation; consultation; relative performance evaluation

In this paper I analyse the strategic interaction of decision makers and their advisers in a consultation process. I find that when agents are concerned about their reputation, consultation results in sub-optimal sharing of information; some decision makers may deliberately act unilaterally and not consult even when advice is costless. When they do consult, decision makers may excessively contradict their adviser's recommendation. Anticipating it, advisers may not report their information truthfully. These results are obtained without assuming either a tournament or a competition between decision makers and their advisers for wages or a future job.