Abstract
Many decisions are made based on persuasion. In the persuasion process, self-interested agents produce information to convince an evaluator to approve their proposals. Whether an evaluator will discount the agents’ suggestions and reject their proposal is neither clear nor obvious. We highlight that persuasion efforts do not necessarily invalidate the value of agents’ information production. Specifically, our study sheds light on why evaluators say “yes” to proposals even if self-interested agents have the intention to persuade the evaluator. The agents are reluctant to discover unfavorable information, which increases the probability of misidentifying bad projects as good ones. However, their efforts in producing favorable information allow the evaluator to identify more good projects out of a pool of unobservable good and bad projects. Following agents’ suggestions can be an optimal decision rule as it takes advantage of agents’ information to identify good projects.
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