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Information Transmission in Nested Sender-Receiver Games

Author Info

  • Sidartha Gordon

    (Département d'économie)

  • Ying Chen

    (Department of Economics (Johns Hopkins University))

Abstract

We introduce a “nestedness” relation for a general class of sender-receiver games and compare equilibrium properties, in particular the amount of information transmitted, across games that are nested. Roughly, game is nested in game if the players’s optimal actions are closer in game. We show that under some conditions, more information is transmitted in the nested game in the sense that the receiver’s expected equilibrium payoff is higher. The results generalize the comparative statics and welfare comparisons with respect to preferences in the seminal paper of Crawford and Sobel (1982). We also derive new results with respect to changes in priors in addition to changes in preferences. We illustrate the usefulness of the results in three applications: (i) delegation to an intermediary with a different prior, the choice between centralization and delegation, and two-way communication with an informed principal.

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Paper provided by Sciences Po Departement of Economics in its series Sciences Po Economics Discussion Papers with number 2014-04.

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Date of creation: Apr 2014
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Handle: RePEc:spo:wpecon:info:hdl:2441/5adcidkke9omt0s9p6m01j1rh
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Keywords: sender-receiver games; information transmission; nestedness; inter- mediary; delegation; informed principal.;

Other versions of this item:

Find related papers by JEL classification:
  • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
  • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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  1. Junichiro Ishida & Takashi Shimizu, 2016. "Cheap talk with an informed receiver," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(1), pages 61-72, April.
  2. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
  3. Olszewski, Wojciech, 2004. "Informal communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 180-200, August.
  4. Szalay, Dezsö, 2012. "Strategic information transmission and stochastic orders," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 386, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  5. Wouter Dessein, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 811-838.
  6. Lai, Ernest K., 2014. "Expert advice for amateurs," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 1-16.
  7. Wei Li, 2010. "Peddling Influence through Intermediaries," American Economic Review, American Economic Association, vol. 100(3), pages 1136-62, June.
  8. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
  9. Watson, Joel, 1996. "Information Transmission When the Informed Party Is Confused," Games and Economic Behavior, Elsevier, vol. 12(1), pages 143-161, January.
  10. John K.‐H. Quah & Bruno Strulovici, 2012. "Aggregating the Single Crossing Property," Econometrica, Econometric Society, vol. 80(5), pages 2333-2348, 09.
  11. Ambrus, Attila & Azevedo, Eduardo M. & Kamada, Yuichiro, 2013. "Hierarchical cheap talk," Theoretical Economics, Econometric Society, vol. 8(1), January.
  12. Ivanov, Maxim, 2010. "Communication via a strategic mediator," Journal of Economic Theory, Elsevier, vol. 145(2), pages 869-884, March.
  13. Ying Chen & Navin Kartik & Joel Sobel, 2008. "Selecting Cheap-Talk Equilibria," Econometrica, Econometric Society, vol. 76(1), pages 117-136, 01.
  14. Jerry R. Green & Nancy L. Stokey, 1980. "A Two-Person Game of Information Transmission," Discussion Papers 418, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Goltsman, Maria & Hörner, Johannes & Pavlov, Gregory & Squintani, Francesco, 2009. "Mediation, arbitration and negotiation," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1397-1420, July.
  16. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  17. repec:dpr:wpaper:0746 is not listed on IDEAS
  18. Che, Yeon-Koo & Kartik, Navin, 2006. "Opinion as Incentives," MPRA Paper 6094, University Library of Munich, Germany, revised 15 Nov 2007.
  19. Seidmann, Daniel J., 1990. "Effective cheap talk with conflicting interests," Journal of Economic Theory, Elsevier, vol. 50(2), pages 445-458, April.
  20. Natalia Lazzati, 2013. "Comparison of equilibrium actions and payoffs across players in games of strategic complements," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(3), pages 777-788, November.
  21. Milton Harris & Artur Raviv, 2005. "Allocation of Decision-making Authority," Review of Finance, Springer, vol. 9(3), pages 353-383, 09.
  22. Chen, Ying, 2012. "Value of public information in sender–receiver games," Economics Letters, Elsevier, vol. 114(3), pages 343-345.
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Cited by:

  1. Szalay, Dezsö, 2012. "Strategic information transmission and stochastic orders," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 386, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. Gordon Rausser & Leo Simon & Jinhua Zhao, 2015. "Rational exaggeration and counter-exaggeration in information aggregation games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(1), pages 109-146, May.
  3. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2015. "Organizing to adapt and compete," LSE Research Online Documents on Economics 58647, London School of Economics and Political Science, LSE Library.

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