Cheap Talk with Outside Options
AbstractIn 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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Bibliographic InfoPaper provided by Department of Management, Università Ca' Foscari Venezia in its series Working Papers with number 16.
Length: 42 pages
Date of creation: Sep 2013
Date of revision:
Cheap Talk; Information Transmission; Experts;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-05 (All new papers)
- NEP-CTA-2013-10-05 (Contract Theory & Applications)
- NEP-GTH-2013-10-05 (Game Theory)
- NEP-MIC-2013-10-05 (Microeconomics)
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