Journal Article

Changing One's Mind when the Facts Change: Incentives of Experts and the Design of Reporting Protocols

Wei Li

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 74, issue 4, pages 1175-1194
Published in print October 2007 | ISSN: 0034-6527
Published online October 2007 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2007.00446.x
Changing One's Mind when the Facts Change: Incentives of Experts and the Design of Reporting Protocols

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Experts often collect and report information over time. What reporting protocol elicits the most information? Here, a principal receives reports sequentially from an agent with privately known ability, who observes two signals about the state of the world. The signals differ in initial quality and, unlike previous work, differ in quality improvement. The paper finds that “mind changes” (inconsistent reports) can signal talent if a smart agent improves faster. Also, sequential reports dominate when the principal's decision is very sensitive to information; a single report dominates if the mediocre agent's signals improve faster or the agent is likely mediocre.

Keywords: D82

Journal Article.  12644 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy

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