This paper analyzes information reporting by a privately informed expert concerned about being perceived to have accurate information. When the expert’s reputation is updated on the basis of the report as well as the realized state, the expert typically does not wish to truthfully reveal the signal observed. The incentives to deviate from truthtelling are characterized and shown to depend on the information structure. In equilibrium, experts can credibly communicate only part of their information. Our results also hold when experts have private information about their own accuracy and care about their reputation relative to others.
Reputational cheap talk
OTTAVIANI, MARCO M.;
2006
Abstract
This paper analyzes information reporting by a privately informed expert concerned about being perceived to have accurate information. When the expert’s reputation is updated on the basis of the report as well as the realized state, the expert typically does not wish to truthfully reveal the signal observed. The incentives to deviate from truthtelling are characterized and shown to depend on the information structure. In equilibrium, experts can credibly communicate only part of their information. Our results also hold when experts have private information about their own accuracy and care about their reputation relative to others.
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