Cheap Talk with Multiple Experts and Uncertain Biases

Gülen Karakoç

doi:10.1515/bejte-2020-0171

Abstract

Abstract A decision maker solicits information from two partially informed experts and then makes a choice under uncertainty. The experts can be either moderately or extremely biased relative to the decision maker, which is their private information. I investigate the incentives of the experts to share their private information with the decision maker and analyze the resulting effects on information transmission. I show that it may be optimal to consult a single expert rather than two experts if the decision maker is sufficiently concerned about taking advice from extremely biased experts. In contrast to what may be expected, this result suggests that getting a second opinion may not always be helpful for decision making.

Highlights

Conventional wisdom suggests that getting a second opinion is helpful for decision making and it is common in many real-life situations, for example: in healthcare markets, patients often seek a second opinion to find the right diagnosis; universities often ask more than one recommendation letter before making tenure decisions; and customers often talk to several salespeople to find the product that
The results suggest that talking to multiple experts may not always be optimal for a decision maker who deals with privately informed biased experts
It is commonly believed that seeking advice from multiple sources improves the information transmission between the uninformed party and the informed parties

Summary

Introduction

Conventional wisdom suggests that getting a second opinion is helpful for decision making and it is common in many real-life situations, for example: in healthcare markets, patients often seek a second opinion to find the right diagnosis; universities often ask more than one recommendation letter before making tenure decisions; and customers often talk to several salespeople to find the product that. Many existing models explain why, and under which conditions, an uninformed decision maker benefits from consulting multiple experts before making a decision (see, e.g., Sobel (2013), for a survey) Most of these models assume that the experts’ biases are known, whereas little is known about the communication when the bias of the expert is private information. When the probability that the decision maker believes the expert to be moderate is low, consulting two experts with uncertain biases increases the likelihood of receiving distorted information from the extreme experts In this case, the decision maker may prefer to consult only one expert because he truthfully communicates his private signal in equilibrium via overshooting effect, even if he is an extreme expert. My result to hold is that the experts’ biases are not too similar so that the extreme expert does not communicate truthfully with the decision-maker in the presence of another expert while he communicates truthfully if he is consulted alone

The Model

Equilibrium Analysis

Fully-Revealing Equilibrium

Semi-Revealing Equilibrium

Welfare Analysis

Conclusion