Working Paper: CEPR ID: DP14149
Authors: Fanny Camara; Nicolas Dupuis
Abstract: To evaluate an expert, the audience needs to compare the prediction of the expert with the realized outcome. But the prediction often affects the amount of public information about the outcome. The result is that the expert can manipulate her audience's ability to monitor the accuracy of her prediction. In a cheap-talk framework, we study how the endogenous nature of public information about the state of the world affects the information transmitted by an expert with reputational concerns. Our innovation consists in assuming that the precision of the public information on the realized state increases monotonically with the audience's interim beliefs. In addition to the conservatism bias found in the existing literature, our model predicts that (i) the expert is less communicative when the prior is low, and (ii) a higher initial reputation can make the expert less credible.(JEL D82, D83, L15)
Keywords: na
JEL Codes: D82; D83; L15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Expert's decision to distort information (D80) | Audience receiving accurate feedback (C83) |
| Audience's posterior belief about expert's ability (D80) | Expert's message received and public signal (L96) |
| Prior belief is low (D80) | Expert is less communicative (Y70) |
| Higher initial reputation (Y70) | Expert's credibility decreases (D83) |
| Expert's perceived high ability (D83) | Audience updates beliefs strongly in direction of expert's report (C92) |
| Expert's communication strategies (Z13) | Audience's belief updates (D83) |