Experts, Conflicts of Interest, and Reputation for Ability

We analyze a model of cheap talk in which an expert that faces a conflict of interest with a decision maker is concerned about establishing a reputation for having accurate information. In this environment, the incentive of the expert to establish a reputation for competence has a non-monotonic effect on the degree of information revelation. An increase in reputation above a certain threshold always makes truthful revelation more difficult to achieve. This is driven by the fact that experts with greater reputation for ability can more easily sway the beliefs of decision makers in a desired direction. Thus, higher levels of reputation exacerbate the incentives of biased experts to misreport their private information. Decision makers will therefore be better off consulting less reputable experts when conflicts are more pronounced