Will truth out?—An advisor’s quest to appear competent

We study a dynamic career-concerns environment with an agent who has incentives to appear competent. It is well known that dynamic career concerns create incentives for an agent to be conservative and to tailor his reports towards a commonly held prior opinion. The existing models, however, have foc...

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Bibliographic Details
Published in:Journal of mathematical economics 2017-10, Vol.72, p.112-121
Main Authors: Klein, Nicolas, Mylovanov, Tymofiy
Format: Article
Language:English
Subjects:
Advisors
Agents
Career concerns
Competence
Incentives
Opinions
Patience
Reputational cheap talk
Strategic information transmission
Studies
Truth
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Summary:We study a dynamic career-concerns environment with an agent who has incentives to appear competent. It is well known that dynamic career concerns create incentives for an agent to be conservative and to tailor his reports towards a commonly held prior opinion. The existing models, however, have focused on short time horizons. We show that, for long time horizons, there exist countervailing incentives for the agent to report his true opinion. In particular, if the agent is sufficiently patient, the time horizon is sufficiently long given the agent’s patience, and the quality of the competent expert is high enough given the time horizon and the discount factor, the beneficial long-term incentives overwhelm any harmful myopic ones, and the incentive problem vanishes.
ISSN:0304-4068
1873-1538
DOI:10.1016/j.jmateco.2017.07.005