Comparative Cheap Talk
AbstractWhen 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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Bibliographic InfoPaper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2004-08.
Date of creation: 2004
Date of revision:
Publication status: Published in Journal of Economic Theory, 2007
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Postal: 1309 East Tenth Street, Room 451, Bloomington, IN 47405-1701
Web page: http://www.bus.indiana.edu/bepp/
More information through EDIRC
multidimensional cheap talk; complementarities;
Other versions of this item:
- L0 - Industrial Organization - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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