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Communication in the shadow of catastrophe

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  • Szalay, DezsÅ‘
  • Deimen, Inga

Abstract

We study the role of risk in strategic information transmission. We show that an increased likelihood of extreme states – heavier tails – decreases the amount of information transmission and makes it optimal to alter the mode of decision-making from communication to simple delegation. Moreover, the worst-case losses under communication increase relative to the worst-case losses under delegation when the tails get heavier.

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  • Szalay, DezsÅ‘ & Deimen, Inga, 2021. "Communication in the shadow of catastrophe," CEPR Discussion Papers 16831, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16831
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    Keywords

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    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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