Too Good to Be Truthful : Why Competent Advisers are Fired

A decision maker asks an adviser repeatedly for advice. The adviser is either competent or incompetent and his preferences are not perfectly aligned with the decision maker's preferences. Over time the decision maker learns about the adviser's type and fires him if he is likely to be incompetent. If the adviser's reputation improves, it is more attractive for him to push his own agenda because he is less likely to be fired for incompetence. Consequently, advisers who are perceived as (very) competent are also fired with positive probability. The advice relationship is most likely to endure if the decision maker is unsure about the adviser's type