We formulate a simple model of advice which can be useful to guide the regulation of the financial retail industry. An informed agent (financial adviser) transmits information to an otherwise uninformed principal (investor) with uncertain degree of strategic sophistication. Incentives for truthful information disclosure and information acquisition are studied. The role of explicit monetary transfers is analyzed.
The economics of advice
OTTAVIANI, MARCO M.
2000
Abstract
We formulate a simple model of advice which can be useful to guide the regulation of the financial retail industry. An informed agent (financial adviser) transmits information to an otherwise uninformed principal (investor) with uncertain degree of strategic sophistication. Incentives for truthful information disclosure and information acquisition are studied. The role of explicit monetary transfers is analyzed.
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