Ulric B. and Evelyn L. Bray Social Sciences Seminar
The power of referential advice
Abstract: Expert advice is often rich and broad, going beyond a simple recommendation. In this paper we show that this additional, referential information plays an important strategic role in expert advice and that it is vital to an expert's power. We develop this result in the context of the canonical model of strategic communication with hard information, enriching the model with a notion of expertise that allows for a meaningful distinction between a recommendation and referential information. Referential ad-vice changes communication as it creates an expectation for additional information that ties the hands of the expert. This can hurt the experts she may be compelled to reveal more information than she would like, up to and including full revelation. It can also help the expert as, by tying her hands, her messages become more credible. We identify an equilibrium in which, with probability one, the expert is strictly better off by providing referential advice than she is in any equilibrium in which she provides a recommendation alone. The benefit of referential advice to the expert is non-monotonic in the complexity of her expertise, reaching its peak when expertise is moderately complex.
Written with Steve Callander and Niko Matouschek. Professor Lambert will be joined by guests Joel Sobel and Bruno Strulovici.
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