Evolving influence: Mitigating extreme conflicts of interest in advisory relationships

Journal Article (Journal Article)

An advocate for a special interest provides advice to a planner, who subsequently makes a sequence of decisions. The advocate is interested only in advancing his cause and will distort his advice to manipulate the planner's choices. Each time she acts the planner observes the result, providing a signal that corroborates or contradicts the advocate's recommendation. Without commitment, no influential communication takes place. With commitment, the planner can exploit the information that is revealed over time to mitigate the advocate's incentive to lie. We derive the optimal mechanism for eliciting advice, characterizing the evolution of the advocate's influence. We also consider costly information acquisition, the use of transfers, and a noisy private signal.

Full Text

Duke Authors

Cited Authors

  • Boleslavsky, R; Lewis, TR

Published Date

  • July 1, 2016

Published In

Volume / Issue

  • 98 /

Start / End Page

  • 110 - 134

Electronic International Standard Serial Number (EISSN)

  • 1090-2473

International Standard Serial Number (ISSN)

  • 0899-8256

Digital Object Identifier (DOI)

  • 10.1016/j.geb.2016.05.005

Citation Source

  • Scopus