Archishman Chakraborty (Zicklin School of Business, Baruch College, CUNY) Rick Harbaugh (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
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When are comparative statements credible? For instance, when can a professor rank different students for an employer, or a stock analyst rank different stocks for a client? We show that simple complementarity conditions ensure that an expert with private information about multiple issues can credibly rank the issues for a decision maker. By restricting the expert’s ability to exaggerate, multidimensional cheap talk of this form permits communication when it would not be credible in a single dimension. The communication gains can be substantial with even a couple of issues, and the complete ranking is asymptotically equivalent to full revelation as the number of issues becomes large. Nevertheless, partial rankings are sometimes more credible and/or more profitable for the expert than the complete ranking. We confirm the robustness of comparative cheap talk to asymmetries that are not too large. Moreover, we show that for a sufficiently large number of independent issues there are always some issues sufficiently symmetric to permit influential cheap talk.
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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number
2004-08.
Find related papers by JEL classification: L0 - Industrial Organization - - General D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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.:
Robert J. Aumann & Sergiu Hart, 2003.
"Long Cheap Talk,"
Econometrica,
Econometric Society, vol. 71(6), pages 1619-1660, November.
[Downloadable!] (restricted)
Other versions:
Robert J. Aumann & Sergiu Hart, 2002.
"Long Cheap Talk,"
Discussion Paper Series
dp284, Center for Rationality and Interactive Decision Theory, Hebrew University, Jerusalem, revised Nov 2002.
[Downloadable!]
Cited by: (explanations, 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.)
Ettore Damiano & Hao Li & Wing Suen, 2006.
"Credible Ratings,"
Working Papers
tecipa-219, University of Toronto, Department of Economics.
[Downloadable!]
Other versions:
Damiano, Ettore & Li, Hao & Suen, Wing, 2006.
"Credible Ratings,"
Micro Theory Working Papers
damiano-06-01-17-01-56-45, Microeconomics.ca Website, revised 17 Jan 2006.
[Downloadable!]
Archishman Chakraborty & Rick Harbaugh, 2006.
"Persuasion by Cheap Talk,"
Working Papers
2006-10, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy, revised Oct 2009.
[Downloadable!]