Interpersonal comparisons and concerns for expertise

We study the effect of introducing interpersonal comparisons on the decisions made by career concerned experts. We consider a model with two experts, a stronger and a weaker, who face common uncertainty about the state of the world. We show that whereas full transmission of the experts' private...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Andina-Díaz, Ascensión, García-Martínez, José A
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2020
Subjects
Equilibrium
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Summary:We study the effect of introducing interpersonal comparisons on the decisions made by career concerned experts. We consider a model with two experts, a stronger and a weaker, who face common uncertainty about the state of the world. We show that whereas full transmission of the experts' private information is an equilibrium when experts care about their absolute level of expertise, this is not necessarily the case when interpersonal comparisons matter and experts care about their relative level of expertise. In this case, we obtain that there is an equilibrium in which experts' decisions follow experts' signals only when the probability of feedback is sufficiently high. Otherwise, the stronger expert benefits from discarding her private information. In equilibrium, this expert may even completely contradict her signal and the other expert's decision. We discuss the implications of this result for reaching experts' consensus and dissent.