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Noisytalk.com: Broadcasting Opinions in a Noisy Environment

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  • Admati, Anat R.

    (Stanford U)

  • Pfleiderer, Paul C.

Abstract

We analyze a model where an altruistic sender, who may or may not be informed, 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 this equilibrium is not necessarily unique nor symmetric. If the sender is overconfident, he tends to exaggerate, and in equilibrium extreme messages are sent more frequently. While overconfidence reduces informativeness in some cases, it may also eliminate less informative equilibria. We also show that overconfidence can improve informativeness when broadcasting is costly.

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Bibliographic Info

Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1670r.

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Date of creation: Aug 2001
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Handle: RePEc:ecl:stabus:1670r

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  1. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  2. Terrance Odean, 1998. "Volume, Volatility, Price and Profit When All Traders Are Above Average," Finance 9803001, EconWPA.
  3. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA.
  4. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
  5. Banks, Jeffrey S., 1990. "A model of electoral competition with incomplete information," Journal of Economic Theory, Elsevier, vol. 50(2), pages 309-325, April.
  6. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-34, December.
  7. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
  8. Terrance Odean, 1998. "Volume, Volatility, Price, and Profit When All Traders Are Above Average," Journal of Finance, American Finance Association, vol. 53(6), pages 1887-1934, December.
  9. Ehrbeck, Tilman & Waldmann, Robert, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 21-40, February.
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