Advanced Search
MyIDEAS: Login

Informational Cascades Elicit Private Information

Contents:

Author Info

  • Olivier Gossner
  • Nicolas Melissas

Abstract

We introduce cheap talk in a dynamic investment model with information externalities. We first show how social learning adversely affects the credibility of cheap talk messages. Next, we show how an informational cascade makes truth-telling incentive compatible. A separating equilibrium only exists for high-surplus projects. Both an investment subsidy and an investment tax can increase welfare. The more precise the sender's information, the higher her incentives to truthfully reveal her private information. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2006.00380.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

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): 47 (2006)
Issue (Month): 1 (02)
Pages: 297-325

as in new window
Handle: RePEc:ier:iecrev:v:47:y:2006:i:1:p:297-325

Contact details of provider:
Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297
Phone: (215) 898-8487
Fax: (215) 573-2057
Email:
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC

Order Information:
Email:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Olivier Gossner & Nicolas Melissas, 2004. "Informational Cascades Elicit Private Information," Game Theory and Information 0405007, EconWPA.
  2. Zwiebel, Jeffrey, 1995. "Corporate Conservatism and Relative Compensation," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 1-25, February.
  3. Farrell, Joseph, 1988. "Communication, coordination and Nash equilibrium," Economics Letters, Elsevier, vol. 27(3), pages 209-214.
  4. Sgroi, Daniel, 2002. "Optimizing Information in the Herd: Guinea Pigs, Profits, and Welfare," Games and Economic Behavior, Elsevier, vol. 39(1), pages 137-166, April.
  5. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  6. Joseph Farrell and Robert Gibbons., 1988. "Cheap Talk Can Matter in Bargaining," Economics Working Papers 8863, University of California at Berkeley.
  7. Baliga, Sandeep & Morris, Stephen, 2002. "Co-ordination, Spillovers, and Cheap Talk," Journal of Economic Theory, Elsevier, vol. 105(2), pages 450-468, August.
  8. Chamley, Christophe, 2004. "Delays and equilibria with large and small information in social learning," European Economic Review, Elsevier, vol. 48(3), pages 477-501, June.
  9. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  10. Gill, D. & Sgroi, D., 2003. "Product Launches with Biased Reviewers: The Importance of Not Being Earnest," Cambridge Working Papers in Economics 0334, Faculty of Economics, University of Cambridge.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Olivier Gossner & Nicolas Melissas, 2006. "Informational Cascades Elicit Private Information ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 297-325, 02.
  2. Pastine, Tuvana, 2005. "Social Learning in Continuous Time: When are Informational Cascades More Likely to be Inefficient?," CEPR Discussion Papers 5120, C.E.P.R. Discussion Papers.
  3. Doyle, Matthew, 2002. "Informational Externalities, Strategic Delay, and the Search for Optimal Policy," Staff General Research Papers 10046, Iowa State University, Department of Economics.
  4. Heidhues, Paul & Melissas, Nicolas, 2012. "Rational exuberance," European Economic Review, Elsevier, vol. 56(6), pages 1220-1240.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:47:y:2006:i:1:p:297-325. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.