Title: Reputational Concern with Endogenous Information Acquisition
Abstract: We develop a reputational cheap talk model in which an expert acquires and conveys information and a decision maker takes a payoff-relevant action. The expert may be aligned or biased: an aligned expert cares about the decision maker's payoff and would like to be known as aligned, whereas a biased expert always distorts information toward a particular direction. Our main finding shows that the aligned expert's reputational concern may have a non-monotonic effect on his incentive to acquire information; that is, he acquires better information if and only if his reputational concern is moderate. Another finding shows that, although the biased type of expert only distorts information transmission, the existence of this type may actually increase the decision maker's payoff. We also examine how delegation may affect the players' decisions and payoffs in this paper and show that even with the rights to better use the information ex post, the aligned expert's information acquisition incentive may be weakened ex ante. Finally, we show that the decision maker prefers communication to delegation whenever informative communication with information acquisition is feasible.