Gurus, Opinion Polls and Social Learning
AbstractThis paper analyzes cheap talk in an investment model with information externalities. In contrast to Gossner and Melissas (2006), I allow for (i) competition effects, (ii) positive network externalities and (iii) more than one interviewed player. In the presence of competition effects, a player will never truthfully reveal her information about the realized state of the world. In the presence of positive network externalities, however, there exists a parameter range where, under mild additional conditions, the unique equilibrium is the separating one. Finally, using numerical computations, I show that for a sufficiently large number of interviewed players there exists a separating equilibrium in my entire parameter range.
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Bibliographic InfoPaper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0703.
Length: 41 pages
Date of creation: Jan 2007
Date of revision:
Cheap Talk; Information Externality; Social Learning; Herd Behaviour;
Find related papers by JEL classification:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-17 (All new papers)
- NEP-CBE-2007-02-17 (Cognitive & Behavioural Economics)
- NEP-NET-2007-02-17 (Network Economics)
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