American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
A Theory of One-Size-Fits-All Recommendations
American Economic Journal: Microeconomics
vol. 14,
no. 4, November 2022
(pp. 318–47)
Abstract
One-size-fits-all recommendations are common in many contexts, including those with a widespread heterogeneity. We propose a model that rationalizes this phenomenon. An expert recommends publicly to two agents whether to adopt a policy. The expert is privately informed about agents payoffs from the policy and his conflict of interest. We show that one-size-fits-all recommendations can be informative even when payoffs are independent across agents. Such recommendations increase the expert's influence by concealing his conflict of interest. We apply the model to recommendations provided by the IMF, World Bank, proxy advisory firms, central banks, and the Basel Committee.Citation
Levit, Doron, and Anton Tsoy. 2022. "A Theory of One-Size-Fits-All Recommendations." American Economic Journal: Microeconomics, 14 (4): 318–47. DOI: 10.1257/mic.20200138Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- E58 Central Banks and Their Policies
- F33 International Monetary Arrangements and Institutions
- F53 International Agreements and Observance; International Organizations
- G28 Financial Institutions and Services: Government Policy and Regulation
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
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