Building on Crawford and Sobel's (1982) general communication model, this paper introduces the possibility that players are non-strategic. The sender might be honest, truthfully reporting private information, or the receiver might be naive, blindly implementing the sender's recommendations . In contrast to the predictions of the fully-strategic model, we show that equilibrium communication is inflated but detailed, and that the equilibrium outcome is biased in an ex-ante sense. Our findings are relevant to understanding communication by financial analysts and academic evaluators.
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Paper provided by University of Rochester - Wallis Institute of Political Economy in its series Wallis Working Papers with number
WP29.
Find related papers by JEL classification: C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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Archishman Chakraborty & Rick Harbaugh, 2004.
"Comparative Cheap Talk,"
Working Papers
2004-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
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