Technical Report Persistence and Snap Decision Making: Inefficient Decisions by a Reputation-Concerned Expert

Tajika, Tomoya

2017-07 , Institute of Economic Research, Hitotsubashi University
Behaving consistently is widely observed, which implies that a person clings to his/her initial opinion and ignores future information that may be more accurate. We explain such behavior by proposing a model in which a reputation-concerned expert has two opportunities to recommend a choice to someone. Before making each recommendation, the expert receives a signal whose accuracy depends on his ability; the second signal is always more accurate. Since a high-ability expert is less likely to receive different signals, the expert has an incentive to pretend to have high ability by recommending the same choice throughout all opportunities. This fact results in the persistency of the initial opinion even when following the second signal is the efficient choice. Further, we consider the case that the expert has the option to remain silent at the first opportunity, which enables the sending of only the more accurate signal and concealing the receiving of different signals. Nevertheless, we find that the expert has an incentive to break silence at the first opportunity and also persists with the initial opinion, which is the driving force behind the expert’s snap decision.

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