Confidence and Competence in Communication
This paper studies information transmission between an uninformed decision maker (receiver) and an informed player (sender) who have asymmetric beliefs ("con?fidence") on the sender?s ability ("competence") to observe the state of nature. We fi?nd that even when the material payoffs of are perfectly aligned, the sender?s over- and underconfi?dence on his information give rise to information loss in communication, although they do not by themselves completely eliminate information transmission in equilibrium. However, an underconfi?dent sender may prefer no communication to informative communication. We also show that when the sender is biased, overconfidence can lead to more information transmission and welfare improvement.
|Date of creation:||13 Sep 2013|
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