Biased Motivation of Experts: Should They be Aggressive or Conservative?

Abstract

When we intend to hire a professional expert, which type of expert should we hire? Although it is sometimes claimed that decisions of experts tend to be conservative, is it optimal to choose a conservative expert? This paper attempts to answer these questions. It will show that a principal should hire a conservative expert, i.e., an expert who has biased preference for maintaining the status quo. The crucial aspect is that there is a possibility that the expert may not transmit truthful information. A neutral expert or an expert who has biased preference for implementing the project has a very strong incentive to recommend the project. Even when he/she cannot recognize whether the project is sufficiently productive, he may recommend the project. Hence, a conservative expert is considered to be beneficial for the principal.