Working Paper: CEPR ID: DP7970
Authors: Yeonkoo Che; Wouter Dessein; Navin Kartik
Abstract: A principal chooses one of n>=2 projects or an outside option. An agent is privately informed about the projects' benefits and shares the principal's preferences except for not internalizing her value from the outside option. We show that strategic communication is characterized by pandering: the agent biases his recommendation toward good-looking projects--those with appealing observable attributes--even when both parties would be better off with some other project. Projects become more acceptable when pitched against a stronger slate of alternatives. We study organizational responses to the pandering distortion, such as delegation and choosing to be less informed.
Keywords: decision processes; delegation; multidimensional cheap talk; pandering; persuasion; resource allocation
JEL Codes: D7; D83; L2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| agent's desire to persuade DM (D91) | recommendations favoring alternatives with appealing observable attributes (D91) |
| observable attractiveness of projects (H43) | distortion of agent's true preference ranking (D79) |
| value of the outside option to DM (C79) | higher likelihood of DM accepting recommendations for better-looking alternatives (C52) |
| value of the outside option to DM (C79) | DM being more skeptical of unattractive options (D91) |