Reputational cheap talk with misunderstanding
We consider a cheap talk game with a sender who has a reputational concern for an ability to predict a state of the world correctly, and where receivers may misunderstand the message sent. When communication between the sender and each receiver is private, we identify an equilibrium in which the sender only discloses the least noisy information. Hence, what determines the amount of information revealed is not the absolute noise level of communication, but the extent to which the noise level may vary. The resulting threshold in transmission noise for which information is revealed may differ across receivers, but is unrelated to the quality of the information channel. When information transmission has to be public, a race to the bottom results: the cut-off level for noise of transmitted information now drops to the lowest cut-off level for any receiver in the audience.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:hoo:wpaper:e-89-7 is not listed on IDEAS
- Scharfstein, David. & Stein, Jeremy C., 1988.
"Herd behavior and investment,"
WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Marco Ottaviani & Peter Norman Sørensen, 2004.
"The Strategy of Professional Forecasting,"
FRU Working Papers
2004/05, University of Copenhagen. Department of Economics. Finance Research Unit.
- Armando Gomes & Gary Gorton & Leonardo Madureira, 2004.
"SEC Regulation Fair Disclosure, Information, and the Cost of Capital,"
NBER Working Papers
10567, National Bureau of Economic Research, Inc.
- Gomes, Armando & Gorton, Gary & Madureira, Leonardo, 2007. "SEC Regulation Fair Disclosure, information, and the cost of capital," Journal of Corporate Finance, Elsevier, vol. 13(2-3), pages 300-334, June.
- V. Crawford & J. Sobel, 2010.
"Strategic Information Transmission,"
Levine's Working Paper Archive
544, David K. Levine.
- Mathias Dewatripont & Jean Tirole, 2005.
"Modes of Communication,"
Journal of Political Economy,
University of Chicago Press, vol. 113(6), pages 1217-1238, December.
- Marco Ottaviani & Peter Sorensen, 1999.
Game Theory and Information
- Andreas Blume & Oliver Board & Kohei Kawamura, 2007.
ESE Discussion Papers
167, Edinburgh School of Economics, University of Edinburgh.
- Michael Woodford, 2005.
"Central Bank Communication and Policy Effectiveness,"
NBER Working Papers
11898, National Bureau of Economic Research, Inc.
- Michael Woodford, 2005. "Central bank communication and policy effectiveness," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 399-474.
- Farrell, J. & Gibbons, R., 1989.
"Cheap Talk With Two Audiences,"
518, Massachusetts Institute of Technology (MIT), Department of Economics.
- Seth B. Carpenter, 2004. "Transparency and monetary policy: what does the academic literature tell policymakers?," Finance and Economics Discussion Series 2004-35, Board of Governors of the Federal Reserve System (U.S.).
- Marco Ottaviani & Peter Norman Sørensen, 2006. "Reputational cheap talk," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 155-175, 03.
- Trueman, Brett, 1994. "Analyst Forecasts and Herding Behavior," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 97-124.
When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:67:y:2009:i:2:p:736-744. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.