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Cheap Talk with Outside Options

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Author Info

  • Saori Chiba

    ()
    (Dept. of Management, Università Ca' Foscari Venice)

  • Kaiwen Leong
  • Kaiwen Leong

    ()
    (Division of Economics, Nanyang Technological University)

Abstract

In Crawford and Sobel (1982) (CS), a sender (S) uses cheap talk to persuade a receiver (R) to select an action as profitable to S as possible. This paper shows that the presence of an outside option Ð that is, allowing R to avoid taking any action, yielding state-independent reservation utilities to R and S Ð has an important qualitative impact on the results. Contrary to CS, in this model, the informativeness of communication is not always decreasing in the level of conflict of interest. Relatedly, communication can be more informative than in CS.

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File URL: http://virgo.unive.it/wpideas/storage/2013wp16.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Department of Management, Università Ca' Foscari Venezia in its series Working Papers with number 16.

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Length: 42 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:vnm:wpdman:52

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Web page: http://www.unive.it/dip.management
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Related research

Keywords: Cheap Talk; Information Transmission; Experts;

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References

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  1. Wouter Dessein, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 811-838.
  2. Augustin Landier & David Sraer & David Thesmar, 2009. "Optimal Dissent in Organizations," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 761-794.
  3. Matthews, Steven A, 1989. "Veto Threats: Rhetoric in a Bargaining Game," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(2), pages 347-69, May.
  4. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," Economics Working Papers 0020, Institute for Advanced Study, School of Social Science.
  5. Bernard Caillaud & Jean Tirole, 2006. "Consensus building: How to persuade a group," PSE Working Papers halshs-00590459, HAL.
  6. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  7. J. Farrell, 2010. "Meaning and Credibility in Cheap Talk Games," Levine's Working Paper Archive 533, David K. Levine.
  8. Ying Chen & Navin Kartik & Joel Sobel, 2008. "Selecting Cheap-Talk Equilibria," Econometrica, Econometric Society, Econometric Society, vol. 76(1), pages 117-136, 01.
  9. Adam Brandenburger & Ben Polak, 1996. "When Managers Cover Their Posteriors: Making the Decisions the Market Wants to See," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 523-541, Autumn.
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Cited by:
  1. Saori Chiba & Kaiwen Leong, 2013. "Managerial Economics of Cheap Talk," Working Papers 24, Department of Management, Università Ca' Foscari Venezia.

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