CEF.UP – ECO Seminar/Webinar

Tuesday – December 19^th, 2023, at 1:00 p.m. | Room 305| Online

“Leveraging Expertise to Build Authority: Experimental Evidence”

Miguel Fonseca  –  University of Exeter

Abstract:

“Decision-makers often seek guidance from experts, whose authority is key for achieving efficiency gains. However, building authority from expertise is challenging, and there is very limited evidence on whether individuals strategically enable it and how. We conduct a laboratory experiment in which an expert recommends a course of action to a decision-maker, and players subsequently bargain over the split of payoffs. In our main treatment, players can bargain pre-play, and we ask whether they use this opportunity to establish authority. We find that pre-play bargaining triples the frequency of authority relationships, resulting in higher efficiency. Authority is strongly associated with agreements that align interests, but only when reached swiftly, indicating that participants exploit bargaining dynamics to signal their intentions. Finally, committing to pre-play bargaining outcomes does not enhance authority compared to non-binding promises due to more challenging bargaining dynamics under commitment. This finding helps explain why informal promises remain prevalent in social interactions.”