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American Economic Review: Vol. 103 No. 1 (February 2013)

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Pandering to Persuade

Article Citation

Che, Yeon-Koo, Wouter Dessein, and Navin Kartik. 2013. "Pandering to Persuade." American Economic Review, 103(1): 47-79.

DOI: 10.1257/aer.103.1.47

Abstract

An agent advises a principal on selecting one of multiple projects or an outside option. The agent is privately informed about the projects' benefits and shares the principal's preferences except for not internalizing her value from the outside option. We show that for moderate outside option values, strategic communication is characterized by pandering: the agent biases his recommendation toward "conditionally better-looking" projects, even when both parties would be better off with some other project. A project that has lower expected value can be conditionally better-looking. We develop comparative statics and implications of pandering. Pandering is also induced by an optimal mechanism without transfers. (JEL D23, D82)

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Authors

Che, Yeon-Koo (Columbia U and YERI, Yonsei U)
Dessein, Wouter (Columbia U)
Kartik, Navin (Columbia U)

JEL Classifications

D23: Organizational Behavior; Transaction Costs; Property Rights
D82: Asymmetric and Private Information; Mechanism Design


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