DP7970 Pandering to Persuade

Author(s): Yeon-Koo Che, Wouter Dessein, Navin Kartik
Publication Date: August 2010
Keyword(s): Decision processes, Delegation, Multi-dimensional cheap talk, Pandering, Persuasion, Resource allocation
JEL(s): D7, D83, L2
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=7970

A principal chooses one of n>=2 projects or an outside option. An 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 strategic communication is characterized by pandering: the agent biases his recommendation toward good-looking projects--those with appealing observable attributes--even when both parties would be better off with some other project. Projects become more acceptable when pitched against a stronger slate of alternatives. We study organizational responses to the pandering distortion, such as delegation and choosing to be less informed.