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American Economic Journal: Microeconomics: Vol. 1 No. 2 (August 2009)

AEJ: Micro Volume. 1, Issue 2 | Previous Article

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Corruptible Advice

Article Citation

Durbin, Erik, and Ganesh Iyer. 2009. "Corruptible Advice." American Economic Journal: Microeconomics, 1(2): 220-42.

DOI: 10.1257/mic.1.2.220

Abstract

We study information transmission to a decision maker from an advisor who values a reputation for incorruptibility in the presence of a third party who offers unobservable payments/bribes. While it is common to ascribe negative effects to such bribes, we show that given reputational concerns, bribes can play a positive role by restoring truthful communication that would otherwise not occur. Thus, while bribes can influence self-interested bad advisors to lie about the unfavorable state, they can also be used to motivate good advisors who care more about the decision maker's utility to truthfully report the favorable state. (JEL D82, D83)

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Authors

Durbin, Erik (Federal Trade Commission)
Iyer, Ganesh (U CA, Berkeley)

JEL Classifications

D82: Asymmetric and Private Information
D83: Search; Learning; Information and Knowledge; Communication; Belief

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