The Korean Journal of Economic Studies
False Advice as Signal of the Unbiased Advisor
Kyung-Young Park (Sungkyunkwan University)Year 2016Vol. 64No. 1
AbstractWhen the decision maker is uncertain about the advisor’s type, an unbiasedadvisor has the incentive to act differently from a biased advisor in order tosignal his type. If the biased advisor tells the truth, then the unbiased advisorgives false advice to the decision maker. This is because the unbiased advisoruses only one type of message to signal his type. Specifically, I show thatthere exists an equilibrium in which the unbiased advisor always lies but thebiased always tells the truth, if the unbiased advisor cares about the future butthe biased advisor the present and the bias of the biased advisor is smallenough. This result is new compared to Kim et al. (2013). Also, I findseveral other equilibria.