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Broadcasting Opinions with an Overconfident Sender

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  • Anat R. Admati
  • Paul Pfleiderer

Abstract

We analyze a model where an altruistic, but possibly overconfident sender broadcasts one of a finite set of messages to rational receivers. If broadcasting is costless and the sender is rational, there is an informationally efficient equilibrium, but multiple equilibria may arise, and asymmetric equilibria might be more informative than the symmetric equilibrium even if the prior is symmetric. Although overconfidence on the part of the sender reduces informativeness in some cases, it may also eliminate less informative equilibria and lead to better information transmission. Overconfidence can also improve the informativeness of the message when broadcasting is costly. Copyright 2004 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 45 (2004)
Issue (Month): 2 (05)
Pages: 467-498

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Handle: RePEc:ier:iecrev:v:45:y:2004:i:2:p:467-498

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Cited by:
  1. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA.
  2. Lundtofte, Frederik & Leoni, Patrick, 2010. "Growth Forecasts, Belief Manipulation and Capital Markets," Working Papers 2010:8, Lund University, Department of Economics, revised 30 May 2012.
  3. Wang, Hefei, 2012. "Costly information transmission in continuous time with implications for credit rating announcements," Journal of Economic Dynamics and Control, Elsevier, vol. 36(9), pages 1402-1413.
  4. Kohei Kawamura (University of Edinburgh), 2013. "Confidence and Competence in Communication," ESE Discussion Papers 222, Edinburgh School of Economics, University of Edinburgh.

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