Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2017

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Costly Advice, Protests and Nonbinding Voting

Mehmet Ekmekci*, Stephan Lauermann

Last modified: 2017-04-18

Abstract


We study a scenario in which a receiver is collecting non-binding advice for a binary decision from partially informed senders who can send binary messages. This reflects situations such as non-binding voting of shareholders on a mangement proposal. Under complete information, the preferences of the receiver and the senders are aligned but there is a conflict of interest over the trade-off of Type I and Type II errors. Existing work shows that for many such situations, the bias prohibits the transmission of any information. Here, in contrast to this work, we consider a setting in which one of the messages is costly. For example, there are positive costs of voting but no costs of abstention. We show that there exists an equilibrium in which informative advice is given. When there are many senders, with costly advice, information aggregates and the outcome is efficient.