An offer you can refuse: the effect of transparency with endogenous conflict of interest. A seminar by James Tremewan

Date/Time
Date(s) - Wed 29 November
12:30 - 14:00

Location
Level 12 Boardroom, Rutherford House, VUW


Abstract

This paper studies the effects of transparency on information transmission and decision-making theoretically and experimentally. We develop a model in which a decision maker seeks the advice of a better-informed adviser. Before giving advice, the adviser may choose to accept a side payment from a third party, where accepting this payment binds the adviser to give a particular recommendation, which may or may not be dishonest. Transparency enables the decision maker to learn the decision of the adviser with respect to the side payment. Prior experimental research has shown that transparency is either ineffective or harmful to decision makers. The novelty of our model is that the conflict of interest is endogenous as the adviser can choose to decline the third-party payment. Our theoretical results predict that transparency is never harmful and may help decision makers. Our experiment shows that transparency does indeed improve the accuracy of decision making.

About Dr James Tremewan

James Tremewan completed a PhD at the Toulouse School of Economics in 2011. From 2011-2017 he had a position as an Assistant Professor at the University of Vienna. He is currently working as a Research Fellow at the Vienna University of Economics and Business, funded by a Jubilaeumsfond grant from the Austrian Central Bank.