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Endogenous ambiguity in cheap talk

Author

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  • Kellner, Christian
  • Le Quement, Mark T.

Abstract

This paper proposes a model of ambiguous language. We consider a simple cheap talk game in which a sender who faces an ambiguity averse receiver is able to perform ambiguous randomization, i.e. to randomize according to unknown probabilities. We show that for any standard influential communication equilibrium there exists an equilibrium featuring an ambiguous communication strategy which Pareto-dominates it in terms of consistent planning ex ante utilities. Ambiguity, by triggering worst-case decision-making by the receiver, shifts the latter's response to information towards the sender's ideal action, thus encouraging more information transmission.

Suggested Citation

  • Kellner, Christian & Le Quement, Mark T., 2018. "Endogenous ambiguity in cheap talk," Journal of Economic Theory, Elsevier, vol. 173(C), pages 1-17.
  • Handle: RePEc:eee:jetheo:v:173:y:2018:i:c:p:1-17
    DOI: 10.1016/j.jet.2017.10.007
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    References listed on IDEAS

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    1. Dominiak, Adam & Duersch, Peter & Lefort, Jean-Philippe, 2012. "A dynamic Ellsberg urn experiment," Games and Economic Behavior, Elsevier, vol. 75(2), pages 625-638.
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    5. Lo, Kin Chung, 1996. "Equilibrium in Beliefs under Uncertainty," Journal of Economic Theory, Elsevier, vol. 71(2), pages 443-484, November.
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    7. Frank Riedel, 2017. "Uncertain Acts in Games," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(4), pages 275-292, December.
    8. Azrieli, Yaron & Teper, Roee, 2011. "Uncertainty aversion and equilibrium existence in games with incomplete information," Games and Economic Behavior, Elsevier, vol. 73(2), pages 310-317.
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    11. Wouter Dessein, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 811-838.
    12. Siniscalchi, Marciano, 2011. "Dynamic choice under ambiguity," Theoretical Economics, Econometric Society, vol. 6(3), September.
    13. Hanany Eran & Klibanoff Peter, 2009. "Updating Ambiguity Averse Preferences," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-53, November.
    14. Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February.
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    16. Kellner, Christian & Le Quement, Mark T., 2018. "Endogenous ambiguity in cheap talk," Journal of Economic Theory, Elsevier, vol. 173(C), pages 1-17.
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    Cited by:

    1. Kellner, Christian & Le Quement, Mark T., 2018. "Endogenous ambiguity in cheap talk," Journal of Economic Theory, Elsevier, vol. 173(C), pages 1-17.
    2. repec:spr:homoec:v:34:y:2017:i:4:d:10.1007_s41412-017-0061-4 is not listed on IDEAS
    3. repec:eee:gamebe:v:104:y:2017:i:c:p:271-292 is not listed on IDEAS
    4. Frank Riedel, 2017. "Uncertain Acts in Games," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(4), pages 275-292, December.
    5. Eichberger, Jürgen & Grant, Simon & Kelsey, David, 2017. "Ambiguity and the Centipede Game: Strategic Uncertainty in Multi-Stage Games," Working Papers 0638, University of Heidelberg, Department of Economics.

    More about this item

    Keywords

    Cheap talk; Ambiguity;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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