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Broadcasting Opinions with an Overconfident Sender

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  • Anat R. Admati
  • Paul Pfleiderer

Abstract

We analyze a model where an altruistic, but possibly overconfident sender broadcasts one of a finite set of messages to rational receivers. If broadcasting is costless and the sender is rational, there is an informationally efficient equilibrium, but multiple equilibria may arise, and asymmetric equilibria might be more informative than the symmetric equilibrium even if the prior is symmetric. Although overconfidence on the part of the sender reduces informativeness in some cases, it may also eliminate less informative equilibria and lead to better information transmission. Overconfidence can also improve the informativeness of the message when broadcasting is costly. Copyright 2004 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Anat R. Admati & Paul Pfleiderer, 2004. "Broadcasting Opinions with an Overconfident Sender," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 467-498, May.
  • Handle: RePEc:ier:iecrev:v:45:y:2004:i:2:p:467-498
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    References listed on IDEAS

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    1. Green, Edward J. & Zhou, Ruilin, 1998. "A Rudimentary Random-Matching Model with Divisible Money and Prices," Journal of Economic Theory, Elsevier, vol. 81(2), pages 252-271, August.
    2. Camera, Gabriele & Corbae, Dean, 1999. "Money and Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 985-1008, November.
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    Cited by:

    1. Lundtofte, Frederik & Leoni, Patrick, 2014. "Growth forecasts, belief manipulation and capital markets," European Economic Review, Elsevier, vol. 70(C), pages 108-125.
    2. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
    3. Kohei Kawamura, 2013. "Confidence and Competence in Communication," ESE Discussion Papers 222, Edinburgh School of Economics, University of Edinburgh.
    4. Yubo Chen & Jinhong Xie, 2008. "Online Consumer Review: Word-of-Mouth as a New Element of Marketing Communication Mix," Management Science, INFORMS, vol. 54(3), pages 477-491, March.
    5. Kohei Kawamura, 2015. "Confidence and competence in communication," Theory and Decision, Springer, vol. 78(2), pages 233-259, February.
    6. Kohei, Kawamura, 2013. "Confidence and Competence in Communication," SIRE Discussion Papers 2013-43, Scottish Institute for Research in Economics (SIRE).
    7. Stephen Baginski & Elizabeth Demers & Chong Wang & Julia Yu, 2016. "Contemporaneous verification of language: evidence from management earnings forecasts," Review of Accounting Studies, Springer, vol. 21(1), pages 165-197, March.
    8. Wang, Hefei, 2012. "Costly information transmission in continuous time with implications for credit rating announcements," Journal of Economic Dynamics and Control, Elsevier, vol. 36(9), pages 1402-1413.

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