Founding Partner Kirsten Edwards-Warren and Senior Consultant Salvatore Piccolo co-authored a paper discussing the role of expert performance disclosure in antitrust. Although agencies increasingly rely on outside economists and technical experts in merger, cartel, and conduct cases, they generally cannot tie compensation to enforcement outcomes without raising concerns about independence. This inability creates a moral hazard problem that undermines experts’ efforts (e.g., the quality of their opinions).
The authors argue that disclosing experts’ past performance can improve incentives, enhance the quality of evidence, and lead to better-informed enforcement decisions. The paper also shows that transparency can attract stronger experts, even with imperfect evaluations, and in team settings, it is important to identify individual contributions, since disclosure at the team level alone only partly addresses moral hazard.
Abstract
Antitrust authorities increasingly rely on external economists and technical experts in merger, cartel, and conduct investigations. Yet because performance pay may undermine independence, experts are rarely rewarded based on enforcement outcomes, creating incentive distortions. We ask whether disclosing expert performance to future employers alleviates this problem. In a Gaussian career-concerns model with endogenous information acquisition, disclosure improves labor-market inference about ability, strengthens effort incentives, reduces the marginal cost of evidence, and leads the authority to make better-informed decisions. Disclosure is optimal if and only if its fixed cost is below a threshold that increases with higher average ability, lower talent dispersion, greater task uncertainty, and noisier priors. We further show that a welfare-minded planner is less inclined to disclose than the authority; that even noisy evaluations strengthen incentives; that transparency attracts stronger experts when participation is endogenous; and that in two-expert teams individual attribution is essential- team-level disclosure only partially mitigates moral hazard.
The views and opinions expressed in this response are those of the authors and do not necessarily reflect the views of Econic Partners or its clients.
