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Accountability and Cheap Talk

  • Di Maggio, Marco

This paper analyzes a cheap talk model with heterogeneous receivers who are accountable for the correctness of their actions, showing that there exists a truth-revealing equilibrium. This sheds new light on the important role played by elections in shaping politicians' and, more surprisingly, advisor's behaviors in a cheap-talk setting. In deciding which message to send, the advisor is aware that he could use this message to affect the electoral outcome, the manipulation effect, or to shape the first period policy, the influence effect. When the first effect dominates the second there exists an informative equilibrium. In addition, I show that the presence of heterogeneous politicians leads to an increase in voters' welfare as a result of better-informed decisions. I allow the politician to delegate authority to the expert, showing that due to the signaling value of the politician's delegation decision, only corrupt or incompetent incumbents will delegate the second-period decision. Finally, I generalize the results in a number of different directions.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18652.

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Date of creation: 15 Nov 2009
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Handle: RePEc:pra:mprapa:18652
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  1. Mathias Dewatripont, 2006. "Transferable control," ULB Institutional Repository 2013/9649, ULB -- Universite Libre de Bruxelles.
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  14. Rey, Patrick & Dewatripont, Mathias & Aghion, Philippe, 2004. "Transferable Control," Scholarly Articles 4481511, Harvard University Department of Economics.
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  16. Takahashi, Satoru & Ambrus, Attila, 2008. "Multi-Sender Cheap Talk with Restricted State Spaces," Scholarly Articles 3200263, Harvard University Department of Economics.
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  20. Morgan, John & Stocken, Phillip C, 2003. " An Analysis of Stock Recommendations," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 183-203, Spring.
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  29. Sandeep Baliga & Tomas Sjöström, 2008. "Strategic Ambiguity and Arms Proliferation," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1023-1057, December.
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  37. Heikki Rantakari, 2008. "Governing Adaptation -super-1," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1257-1285.
  38. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part I: A Single Policy Task," Levine's Working Paper Archive 321307000000000870, David K. Levine.
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  41. Erik Durbin & Ganesh Iyer, 2009. "Corruptible Advice," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 220-42, August.
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