We model a game similar to the interaction between an academic advisor and advisee. Like the classic cheap talk setup, an informed player sends information to an uninformed receiver who is to take an action which affects the payoffs of both sender and receiver. However, unlike the classic cheap talk setup, the preferences regarding the receiver's actions are identical for both sender and receiver. Additionally, the sender incurs a communication cost which is increasing in the complexity of the message sent. We characterize the resulting equilibria. Under an additional out-of-equilibrium condition (Condition L), if preferences for sender and receiver are identical then the only equilibria are the most informative, feasible ones. A similar result appears in Chen, Kartik and Sobel (2008) when their No Incentive to Separate (NITS) condition is applied to the case where communication is costless but preferences diverge. Additionally, we model the competency of the advisee by the probability that the action is selected by mistake. We show that the informativeness of the sender is decreasing in the likelihood of the mistake. When the preferences between players diverge and when there are communication costs, we are not guaranteed uniqueness and we provide an example where an increase in communication costs can improve communication.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
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Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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Andreas Blume & Oliver Board & Kohei Kawamura, 2007.
"Noisy Talk,"
ESE Discussion Papers
167, Edinburgh School of Economics, University of Edinburgh.
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Board, Oliver J. & Blume, Andreas & Kawamura, Kohei, 2007.
"Noisy talk,"
Theoretical Economics,
Society for Economic Theory, vol. 2(4), pages 395-440, December.
[Downloadable!]
Mathias Dewatripont & Jean Tirole, 2005.
"Modes of Communication,"
Journal of Political Economy,
University of Chicago Press, vol. 113(6), pages 1217-1238, December.
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