Reputation and Information Aggregation

Journal of Economic Behavior and Organization. 2023. No. 208. P. 156–173.

Catonini E., Stepanov S.

We analyze how reputation concerns of a partially informed decision maker affect her ability to extract information from reputation-concerned advisors. Too-high decision maker’s reputation concerns destroy her incentives to seek advice. However, when such concerns are low, she is tempted to solicit advice regardless of her private information, which can undermine advisors’ truth-telling incentives. The optimal strength of the decision maker’s reputation concerns maximizes advice-seeking while preserving advisors’ truth-telling. Prior uncertainty about the state of nature calls for a more reputation-concerned decision maker. Higher expected competence of advisors may worsen information aggregation, unless the decision maker’s reputation concerns are properly adjusted.

Keywords: принятие решений, decision making

Publication based on the results of: Research in Financial Economics: Impact of network connections on bond funds during the sovereign default, investors’ attention and pricing of option contracts, modeling investors’ ambiguity (2023)