MICRO/THEORY: Disclosure of conflicts of interest: Good news or bad news?; Professor Ming LI (Concordia University)

Abstract

We investigate the welfare e ect of disclosure of conflict of interest when an expert advises a decision maker. In a model with verifiable information and uncertainty about the expert's conflict of interest and the informedness of the expert, we show that disclosure of the expert's bias is counterproductive when the magnitude of the expert's bias is not too large and the likelihood of the expert being informed is low. Moreover, the harm of disclosing the expert's conflict of interest is more significant when there is a larger uncertainty about the nature of the expert's conflict of interests.