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Strategic Communication with Lying Costs

  • Navin Kartik

I study a model of strategic communication between an uninformed Receiver and an informed but upwardly biased Sender. The Sender bears a cost of lying, or more broadly, of misrepresenting his private information. The main results show that inflated language naturally arises in this environment, where the Sender (almost) always claims to be of a higher type than he would with complete information. Regardless of the intensity of lying cost, there is incomplete separation, with some pooling on the highest messages. The degree of language inflation and how much information is revealed depend upon the intensity of lying cost. The analysis delivers a framework to span a class of cheap-talk and verifiable disclosure games, unifying the polar predictions they make under large conflicts of interest. I use the model to discuss how the degree of manipulability of information can affect the trade-off between delegation and communication. Copyright 2009, Wiley-Blackwell.

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Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 76 (2009)
Issue (Month): 4 ()
Pages: 1359-1395

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Handle: RePEc:oup:restud:v:76:y:2009:i:4:p:1359-1395
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  1. Joseph Tao-yi Wang & Michael Spezio & Colin F. Camerer, 2006. "Pinocchio's Pupil: Using Eyetracking and Pupil Dilation to Understand Truth-telling and Deception in Games," Levine's Bibliography 321307000000000042, UCLA Department of Economics.
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  7. Eso, Peter & Schummer, James, 2004. "Bribing and signaling in second price auctions," Games and Economic Behavior, Elsevier, vol. 47(2), pages 299-324, May.
  8. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  9. Daniel J. Seidmann & Eyal Winter, 1997. "Strategic Information Transmission with Verifiable Messages," Econometrica, Econometric Society, vol. 65(1), pages 163-170, January.
  10. Lacker, Jeffrey M & Weinberg, John A, 1989. "Optimal Contracts under Costly State Falsification," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1345-63, December.
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  12. Marco Ottaviani & Francesco Squintani, 2006. "Naive audience and communication bias," International Journal of Game Theory, Springer, vol. 35(1), pages 129-150, December.
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