Anti-herding and strategic consultation

Abstract

In this paper I analyze how careerist decision makers aggregate and use information provided by others. I find that decision makers who are motivated by reputation concerns tend to 'anti-herding', i.e., they excessively contradict public information such as the prior or others' recommendations. I also find that some decision makers may deliberately act unilaterally and not consult advisers although advice is costless. Moreover, advisers to the decision maker may not report their information truthfully. Even if the advisers care only about the outcome, they bias their recommendation since they anticipate inefficient anti-herding behavior by the decision maker. © 2003 Elsevier B.V. All rights reserved.