Evolving influence: Mitigating extreme conflicts of interest in advisory relationships

Raphael Boleslavsky, Tracy R. Lewis

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)110-134
Number of pages25
JournalGames and Economic Behavior
Volume98
DOIs
StatePublished - Jul 1 2016
Externally publishedYes

Keywords

  • Advocacy
  • Influence
  • Long-term advisory relationship
  • Multi-period delegation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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