Munich Personal RePEc Archive

Talking to Influence and the Consulting Paradox

Dell'Era, Michele (2019): Talking to Influence and the Consulting Paradox.

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This paper studies expert advice when an influence-hungry expert derives an intrinsic benefit from influencing a client’s decision. A consulting paradox arises: the more the client needs advice, the less accurate is expert advice. The reason is that the expert’s benefit from influence engenders an incentive to misreport information which is positively related to the client’s need of advice. This paradox advances the debate on consulting beyond its focus on commissions and provides a new explanation to experts’ misreporting of information. Finally, the consulting paradox sheds light on the challenges posed by influence-hungry experts to client protection authorities and the consulting industry.

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