The Limits of Verifiability: Credibility and Flexibility in Communication

We compare verifiable and unverifiable communication in a sender- receiver setting with partially aligned preferences, where the sender knows more than what her evidence can prove. We identify a credibility–flexibility tradeoff: tying the sender’s claims to her evidence enhances her credibility, but limits how flexibly she can communicate when her evidence does not accurately reflect her private information. This tradeoff changes the economics of verifiable disclosure. When preferences are sufficiently aligned, full evidence disclosure is neither sustainable in equilibrium nor efficient. We show that verifiability facilitates communication when preferences are sufficiently misaligned, but hinders it when they are sufficiently aligned, suggesting that institutions that impose verification need not always improve information transmission. Finally, we study how verifiable and unverifiable communication can complement one another when both are available: unverifiable communication can contextualize verifiable evidence when the latter is misleading.