Relying on the Information of Interested Parties
We investigate the conventional wisdom that competition among interested parties attempting to influence a decision maker by providing veriﬁable information brings out all the relevant information. We ﬁnd that, if the decision maker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties, competition may be unnecessary; while if the decision maker is unsophisticated or not well informed, competition is not generally suﬀicient. However, if the interested parties’ interests are suﬀiciently opposed, or if the decision maker is seeking to advance the parties’ decision maker’s need for prior knowledge about the relevant variables and for strategic sophistication. In other settings, only the combination of competition among information providers and a sophisticated skepticism is suﬀicient to allow defective decision making.
Milgrom, Paul R. and Roberts, John, "Relying on the Information of Interested Parties" (1985). Cowles Foundation Discussion Papers. 990.