Welfare and Competition in Expert Advice Markets

We perform a controlled experiment to study the welfare effects of competition within a strategic communication environment. Two equally informed senders with conflicting interests can misreport information at a cost. We compare a treatment where only one sender communicates to a treatment where both senders privately communicate with a decision-maker, all else equal. Data show that competition fails to improve decision-making and harms senders' welfare. As a result, the overall market welfare is significantly lower under competition. In both treatments, senders reveal less information, and decision-makers obtain less than the most informative equilibria predict. However, they still reveal and get more information compared to other equilibria.