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Information Design in Cheap Talk

Author

Listed:
  • Qianjun Lyu
  • Wing Suen

Abstract

An uninformed sender publicly commits to an informative experiment about an uncertain state, privately observes its outcome, and sends a cheap-talk message to a receiver. We provide an algorithm valid for arbitrary state-dependent preferences that will determine the sender’s optimal experiment and his equilibrium payoff under binary state space. We give sufficient conditions for information design to be valuable or not under different payoff structures. These conditions depend more on marginal incentives - how payoffs vary with the state - than on the alignment of sender’s and receiver’s rankings over actions within a state. The algorithm can be easily modified to study canonical cheap talk games with a perfectly informed sender.

Suggested Citation

  • Qianjun Lyu & Wing Suen, 2023. "Information Design in Cheap Talk," CRC TR 224 Discussion Paper Series crctr224_2023_470, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_470
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp470
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    References listed on IDEAS

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    More about this item

    Keywords

    marginal incentives; common interest; concave envelope; quasiconcave envelope; double randomization;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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