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Noisytalk.com: Broadcasting Opinions in a Noisy Environment

Author

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  • Admati, Anat R.

    (Stanford U)

  • Pfleiderer, Paul C.

Abstract

We analyze a model where an altruistic sender, who may or may not be informed, 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 this equilibrium is not necessarily unique nor symmetric. If the sender is overconfident, he tends to exaggerate, and in equilibrium extreme messages are sent more frequently. While overconfidence reduces informativeness in some cases, it may also eliminate less informative equilibria. We also show that overconfidence can improve informativeness when broadcasting is costly.

Suggested Citation

  • Admati, Anat R. & Pfleiderer, Paul C., 2001. "Noisytalk.com: Broadcasting Opinions in a Noisy Environment," Research Papers 1670r, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:1670r
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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1670R.pdf
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    References listed on IDEAS

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    1. Terrance Odean, 1998. "Volume, Volatility, Price, and Profit When All Traders Are Above Average," Journal of Finance, American Finance Association, vol. 53(6), pages 1887-1934, December.
    2. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
    3. Joel Sobel, 1985. "A Theory of Credibility," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 557-573.
    4. Banks, Jeffrey S., 1990. "A model of electoral competition with incomplete information," Journal of Economic Theory, Elsevier, vol. 50(2), pages 309-325, April.
    5. Tilman Ehrbeck & Robert Waldmann, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 21-40.
    6. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    7. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
    8. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-1134, December.
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    JEL classification:

    • D00 - Microeconomics - - General - - - General

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