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Persuasion by Cheap Talk

  • Archishman Chakraborty

    (Baruch College, City University of New York)

  • Rick Harbaugh

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

We consider the credibility, persuasiveness, and informativeness of multidimensional cheap talk by an expert to a decision maker. We find that an expert with state-independent preferences can always make credible comparative statements that trade off the expert's incentive to exaggerate on each dimension. Such communication benefits the expert -- cheap talk is "persuasive" -- if her preferences are quasiconvex. Communication benefits a decision maker by allowing for a more informed decision, but strategic interactions between multiple decision makers can reverse this gain. We apply these results to topics including media bias, advertising, product recommendations, voting, and auction disclosure.

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File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2006-10-chakraborty-harbaugh.pdf
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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2006-10.

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Date of creation: Jun 2006
Date of revision: Oct 2009
Publication status: Forthcoming in American Economic Review
Handle: RePEc:iuk:wpaper:2006-10
Note: Formally circulated as Clearly Biased Experts
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