IDEAS home Printed from https://ideas.repec.org/a/eee/jetheo/v132y2007i1p70-94.html
   My bibliography  Save this article

Comparative cheap talk

Author

Listed:
  • Chakraborty, Archishman
  • Harbaugh, Rick

Abstract

When are comparative statements credible? For instance, when can a professor rank different students for an employer, or a stock analyst rank different stocks for a client? We show that simple complementarity conditions ensure that an expert with private information about multiple issues can credibly rank the issues for a decision maker. By restricting the expert’s ability to exaggerate, multidimensional cheap talk of this form permits communication when it would not be credible in a single dimension. The communication gains can be substantial with even a couple of issues, and the complete ranking is asymptotically equivalent to full revelation as the number of issues becomes large. Nevertheless, partial rankings are sometimes more credible and/or more profitable for the expert than the complete ranking. We confirm the robustness of comparative cheap talk to asymmetries that are not too large. Moreover, we show that for a sufficiently large number of independent issues there are always some issues sufficiently symmetric to permit influential cheap talk.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Chakraborty, Archishman & Harbaugh, Rick, 2007. "Comparative cheap talk," Journal of Economic Theory, Elsevier, vol. 132(1), pages 70-94, January.
  • Handle: RePEc:eee:jetheo:v:132:y:2007:i:1:p:70-94
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022-0531(05)00172-9
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    • 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.

    References listed on IDEAS

    as
    1. Mas-Colell,Andreu, 1990. "The Theory of General Economic Equilibrium," Cambridge Books, Cambridge University Press, number 9780521388702, August.
    2. Marco Battaglini, 2002. "Multiple Referrals and Multidimensional Cheap Talk," Econometrica, Econometric Society, vol. 70(4), pages 1379-1401, July.
    3. Marco Ottaviani & Francesco Squintani, 2002. "Non-Fully Strategic Information Transmission," Wallis Working Papers WP29, University of Rochester - Wallis Institute of Political Economy.
    4. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
    5. Susan Athey, 2002. "Monotone Comparative Statics under Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 187-223.
    6. Paul E. Fischer & Phillip C. Stocken, 2001. "Imperfect Information and Credible Communication," Journal of Accounting Research, Wiley Blackwell, vol. 39(1), pages 119-134, June.
    7. William Chan & Li Hao & Wing Suen, 2007. "A Signaling Theory Of Grade Inflation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 1065-1090, August.
    8. Levy, Gilat & Razin, Ronny, 2004. "Multidimensional Cheap Talk," CEPR Discussion Papers 4393, C.E.P.R. Discussion Papers.
    9. Costrell, Robert M, 1994. "A Simple Model of Educational Standards," American Economic Review, American Economic Association, vol. 84(4), pages 956-971, September.
    10. Baliga, Sandeep & Morris, Stephen, 2002. "Co-ordination, Spillovers, and Cheap Talk," Journal of Economic Theory, Elsevier, vol. 105(2), pages 450-468, August.
    11. Crawford, Vincent P., 2001. "Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions," University of California at San Diego, Economics Working Paper Series qt6k65014s, Department of Economics, UC San Diego.
    12. Robert J. Aumann & Sergiu Hart, 2003. "Long Cheap Talk," Econometrica, Econometric Society, vol. 71(6), pages 1619-1660, November.
      • Robert J. Aumann & Sergiu Hart, 2002. "Long Cheap Talk," Discussion Paper Series dp284, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem, revised Nov 2002.
    13. David Spector, 2000. "Rational Debate and One-Dimensional Conflict," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 181-200.
    14. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
    15. Morgan, John & Stocken, Phillip C, 2003. "An Analysis of Stock Recommendations," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 183-203, Spring.
    16. Wouter Dessein, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 811-838.
    17. Vincent P. Crawford, 2003. "Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions," American Economic Review, American Economic Association, vol. 93(1), pages 133-149, March.
    18. Chakraborty, Archishman & Harbaugh, Rick, 2003. "Cheap talk comparisons in multi-issue bargaining," Economics Letters, Elsevier, vol. 78(3), pages 357-363, March.
    19. Phillip C. Stocken, 2000. "Credibility of Voluntary Disclosure," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 359-374, Summer.
    20. Joel Sobel, 1985. "A Theory of Credibility," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 557-573.
    21. Michael Ostrovsky & Michael Schwarz, 2003. "Equilibrium Information Disclosure: Grade Inflation and Unraveling," Harvard Institute of Economic Research Working Papers 1996, Harvard - Institute of Economic Research.
    22. Matthew O Jackson & Hugo F Sonnenschein, 2007. "Overcoming Incentive Constraints by Linking Decisions -super-1," Econometrica, Econometric Society, vol. 75(1), pages 241-257, January.
    23. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    24. Krishna, Vijay & Morgan, John, 2004. "The art of conversation: eliciting information from experts through multi-stage communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 147-179, August.
    25. Joseph Farrell, 1987. "Cheap Talk, Coordination, and Entry," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 34-39, Spring.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Di Maggio, Marco, 2009. "Accountability and Cheap Talk," MPRA Paper 18652, University Library of Munich, Germany.
    2. Irene Valsecchi, 2013. "The expert problem: a survey," Economics of Governance, Springer, vol. 14(4), pages 303-331, November.
    3. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization?," American Economic Review, American Economic Association, vol. 98(1), pages 145-179, March.
    4. Ming Li, 2003. "To Disclose or Not to Disclose: Cheap Talk with Uncertain Biases," Working Papers 04003, Concordia University, Department of Economics, revised Aug 2004.
    5. Wonsuk Chung & Rick Harbaugh, 2019. "Biased recommendations from biased and unbiased experts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 520-540, June.
    6. Golosov, Mikhail & Skreta, Vasiliki & Tsyvinski, Aleh & Wilson, Andrea, 2014. "Dynamic strategic information transmission," Journal of Economic Theory, Elsevier, vol. 151(C), pages 304-341.
    7. Archishman Chakraborty & Rick Harbaugh, 2010. "Persuasion by Cheap Talk," American Economic Review, American Economic Association, vol. 100(5), pages 2361-2382, December.
      • Archishman Chakraborty & Rick Harbaugh, 2006. "Persuasion by Cheap Talk," Working Papers 2006-10, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy, revised Oct 2009.
    8. Edoardo Grillo, 2013. "Reference Dependence, Risky Projects and Credible Information Transmission," Carlo Alberto Notebooks 331, Collegio Carlo Alberto.
    9. Maxim Ivanov, 2016. "Dynamic learning and strategic communication," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(3), pages 627-653, August.
    10. Jung, Hanjoon Michael, 2007. "Strategic Information Transmission through the Media," MPRA Paper 5556, University Library of Munich, Germany, revised Oct 2007.
    11. Alonso, Ricardo, 2009. "Strategic control and strategic communication," LSE Research Online Documents on Economics 58682, London School of Economics and Political Science, LSE Library.
    12. Lai, Ernest K. & Lim, Wooyoung & Wang, Joseph Tao-yi, 2015. "An experimental analysis of multidimensional cheap talk," Games and Economic Behavior, Elsevier, vol. 91(C), pages 114-144.
    13. Chirantan Ganguly & Indrajit Ray, 2009. "Simple Mediation in a Cheap-Talk Game," Discussion Papers 05-08, Department of Economics, University of Birmingham.
    14. de Groot Ruiz, Adrian & Offerman, Theo & Onderstal, Sander, 2015. "Equilibrium selection in experimental cheap talk games," Games and Economic Behavior, Elsevier, vol. 91(C), pages 14-25.
    15. Kovác, Eugen & Mylovanov, Tymofiy, 2009. "Stochastic mechanisms in settings without monetary transfers: The regular case," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1373-1395, July.
    16. Dobler, Michael, 2008. "Incentives for risk reporting -- A discretionary disclosure and cheap talk approach," The International Journal of Accounting, Elsevier, vol. 43(2), pages 184-206.
    17. Hongbin Cai, 2009. "Costly participation and heterogeneous preferences in informational committees," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 173-189, March.
    18. Miettinen, Topi, 2013. "Promises and conventions – An approach to pre-play agreements," Games and Economic Behavior, Elsevier, vol. 80(C), pages 68-84.
    19. Damiano, Ettore & Li, Hao & Suen, Wing, 2008. "Credible ratings," Theoretical Economics, Econometric Society, vol. 3(3), September.
    20. Kim, Kyungmin & Pogach, Jonathan, 2014. "Honesty vs. advocacy," Journal of Economic Behavior & Organization, Elsevier, vol. 105(C), pages 51-74.

    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:132:y:2007:i:1:p:70-94. 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: . General contact details of provider: http://www.elsevier.com/locate/inca/622869 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622869 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.