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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. Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Working Papers 154, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  2. Olszewski, Wojciech, 2004. "Informal communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 180-200, August.
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  4. Cukierman, Alex & Tommasi, Mariano, 1998. "When Does It Take a Nixon to Go to China?," American Economic Review, American Economic Association, vol. 88(1), pages 180-97, March.
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  8. Valley, Kathleen & Thompson, Leigh & Gibbons, Robert & Bazerman, Max H., 2002. "How Communication Improves Efficiency in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 38(1), pages 127-155, January.
  9. Sumon Majumdar & Sharun W. Mukand, 2004. "Policy Gambles," Discussion Papers Series, Department of Economics, Tufts University 0407, Department of Economics, Tufts University.
  10. Stephen Morris, 1999. "Political Correctness," Cowles Foundation Discussion Papers 1242, Cowles Foundation for Research in Economics, Yale University.
  11. 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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  13. Marco Battaglini, 2000. "Multiple Referrals and Multidimensional Cheap Talk," Econometric Society World Congress 2000 Contributed Papers 1557, Econometric Society.
  14. Chakraborty, Archishman & Harbaugh, Rick, 2007. "Comparative cheap talk," Journal of Economic Theory, Elsevier, vol. 132(1), pages 70-94, January.
    • Archishman Chakraborty & Rick Harbaugh, 2004. "Comparative Cheap Talk," Working Papers 2004-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  15. Scharfstein, David. & Stein, Jeremy C., 1988. "Herd behavior and investment," Working papers WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  16. Sandeep Baliga & Tomas Sjostrom, 2001. "Arms Races and Negotiations," NajEcon Working Paper Reviews 391749000000000005, www.najecon.org.
  17. 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.
  18. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
  19. Ambrus, Attila & Takahashi, Satoru, 2008. "Multi-sender cheap talk with restricted state spaces," Theoretical Economics, Econometric Society, vol. 3(1), March.
  20. Ronny Razin & Gilat Levy, 2004. "Multidimentional Cheap Talk," 2004 Meeting Papers 184, Society for Economic Dynamics.
  21. Farrell, Joseph & Gibbons, Robert, 1988. "Cheap Talk Can Matter in Bargaining," Department of Economics, Working Paper Series qt3qz786xq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  22. Mathias Dewatripont & Philippe Aghion & Patrick Rey, 2004. "Transferable control," ULB Institutional Repository 2013/9647, ULB -- Universite Libre de Bruxelles.
  23. Sandeep Baliga & Tomas Sj�str�m, 2004. "Arms Races and Negotiations," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 351-369.
  24. Gromb, Denis & Martimort, David, 2004. "The Organization of Delegated Expertise," CEPR Discussion Papers 4572, C.E.P.R. Discussion Papers.
  25. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  26. Erik Durbin & Ganesh Iyer, 2009. "Corruptible Advice," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 220-42, August.
  27. Benabou, R. & Laroque, G., 1988. "Using Privileged Information To Manipulate Markets: Insiders, Gurus And Credibility," Papers 19, Princeton, Woodrow Wilson School - Discussion Paper.
  28. Gilat Levy, 2004. "Anti-herding and strategic consultation," LSE Research Online Documents on Economics 541, London School of Economics and Political Science, LSE Library.
  29. Vincent P. Crawford, 2003. "Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions," American Economic Review, American Economic Association, vol. 93(1), pages 133-149, March.
  30. Marco Ottaviani & Peter Norman Sørensen, 2006. "Reputational cheap talk," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 155-175, 03.
  31. Morten Bennedsen & Sven E. Feldmann, 2000. "Informational Lobbying and Political Contributions," CIE Discussion Papers 2000-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  32. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part I: A Single Policy Task," American Economic Review, American Economic Association, vol. 97(1), pages 169-179, March.
  33. Heikki Rantakari, 2008. "Governing Adaptation -super-1," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1257-1285.
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  35. Andreas Blume & Oliver Board, 2009. "Intentional Vagueness," Working Papers 381, University of Pittsburgh, Department of Economics, revised May 2009.
  36. Giuseppe Moscarini, 2007. "Competence Implies Credibility," American Economic Review, American Economic Association, vol. 97(1), pages 37-63, March.
  37. repec:rje:randje:v:37:y:2006:1:p:155-175 is not listed on IDEAS
  38. Peter Sorensen & Marco Ottaviani, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June.
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  40. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
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