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Experts' reputation concerns and information sharing.

Student: Kurbatov Andrey

Supervisor: Sergey Stepanov

Faculty: Faculty of Economic Sciences

Educational Programme: Joint HSE-NES Undergraduate Program in Economics (Bachelor)

Final Grade: 10

Year of Graduation: 2017

We study the optimal organization of expertise performed by two analysts. The decision maker has no private information about the true state of the world and relies on the experts' reports to determine the best action. The key feature of the setup is that the experts have reputation concerns, as each expert wants to be perceived as competent. We study how allowing information exchange between the experts affects the overall quality of information transmitted to the decision maker. We show that the fully informative equilibrium does not exist if communication between experts is allowed. At the same time, it exists when the information exchange is not allowed, provided that the prior about the state of the world is sufficiently weak (high prior uncertainty) relative to the expected quality of the experts. Thus, in such a case, allowing information exchange between the analysts decreases the informativeness of their reports and the expected pay-off of the decision maker. On the contrary, when the prior about the state is sufficiently strong relative to the expected experts' quality, allowing communication between them improves the informativeness of their reports and the expected pay-off of the decision maker.

Full text (added May 25, 2017)

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