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Reputation and Information Aggregation

6 April 2017 at 12:15 PM - 1:30 PM

Room 207, Campus on Viale Romania, 32

Speaker: Emiliano Catonini, HSE

We analyze how reputation concerns of a partially informed decision maker affect her ability to extract information from reputation-concerned advisors. Contrary to most of the literature, we show that the decision maker's concerns for her reputation as an expert can improve information aggregation. When the decision maker’s reputation concerns are very low, she is tempted to ask for advice regardless of her private information, which undermines advisors'’ truth-telling incentives. Very high reputation concerns destroy the incentives to seek advice. The optimal strength of the decision maker'’s reputation concerns maximizes advice-asking without undermining advisors'’ incentives. Prior uncertainty about the state of nature calls for
a more reputation-concerned decision maker, unless the uncertainty becomes too high, in which case the reputation concerns become (almost) irrelevant. Finally, higher prior competence of advisors may worsen the quality of decisions when the decision maker’'s reputation concerns are not sufficiently strong. (joint work with Sergey Stepanov)