The power of referential advice

Steven Callander, Nicolas S. Lambert, Niko Matouschek

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Expert advice often extends beyond a simple recommendation, including information about alternative options. To explore the role of this referential advice, we enrich the expert’s informational advantage in a canonical model of communication with hard information. We show that when constructed just right, referential advice dissuades the decision maker from choosing options other than the recommendation, thereby making the recommendation itself more persuasive. We identify an equilibrium in which, with probability 1, the expert is strictly better off providing referential advice than she is in any equilibrium in which she provides a recommendation alone.

Original languageEnglish (US)
Pages (from-to)3073-3140
Number of pages68
JournalJournal of Political Economy
Volume129
Issue number11
DOIs
StatePublished - Nov 2021

Funding

We thank Arjada Bardhi, Dirk Bergemann, Ben Brooks, Wouter Dessein, Marina Halac, Gilat Levy, Meg Meyer, David Myatt, Motty Perry, Andrea Prat, Luis Rayo, Daniel Seidmann, Joel Sobel, Bruno Strulovici, Ashutosh Thakur, and Eray Turkel as well as participants at various conferences and seminars, an editor, and three referees for their comments and suggestions. Lambert thanks Microsoft Research and the Cowles Foundation at Yale University for their hospitality and financial support. This paper was edited by Emir Kamenica.

ASJC Scopus subject areas

  • Economics and Econometrics

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