Take it or Leave It: A Theory of Strategic Advice

Strategic decisions can be uncertain and intractable, so decision-makers commonly seek advice from peers. Yet finding a skilled advisor is tricky: People are poor judges of skill, even more so in the wicked environments where many strategic decisions happen. Starting from micro-level empirical data, we craft a theoretical model of strategic advice-taking and its consequences. We show that if decision-makers were perfect judges of skill, then advice-taking is always beneficial. But under experimentally validated assumptions of skill misjudgment, peer advice benefits the less-skilled while harms highly skilled decision-makers. As this bifurcation propagates through an organization, it degrades skill and harms performance. Turning to solutions, we propose when limiting advice-taking is beneficial for individuals and organizations.