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Information Transmission in Nested Sender-Receiver Games

Author

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  • 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.

Suggested Citation

  • Sidartha Gordon & Ying Chen, 2014. "Information Transmission in Nested Sender-Receiver Games," Sciences Po Economics Discussion Papers 2014-04, Sciences Po Departement of Economics.
    • Handle: RePEc:spo:wpecon:info:hdl:2441/5adcidkke9omt0s9p6m01j1rh
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    References listed on IDEAS

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    Cited by:

    1. Bilancini, Ennio & Boncinelli, Leonardo, 2018. "Signaling with costly acquisition of signals," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 141-150.
    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. Kellner, Christian & Le Quement, Mark T., 2018. "Endogenous ambiguity in cheap talk," Journal of Economic Theory, Elsevier, vol. 173(C), pages 1-17.
    4. Saori Chiba & Kazumi Hori, 2020. "Two-sided Strategic Information Transmission," KIER Working Papers 1029, Kyoto University, Institute of Economic Research.
    5. Frug, Alexander, 2016. "A note on optimal cheap talk equilibria in a discrete state space," Games and Economic Behavior, Elsevier, vol. 99(C), pages 180-185.
    6. Oded Berman & Mohammad M. Fazel-Zarandi & Dmitry Krass, 2019. "Truthful Cheap Talk: Why Operational Flexibility May Lead to Truthful Communication," Management Science, INFORMS, vol. 65(4), pages 1624-1641, April.
    7. Alonso, Ricardo & Dessein, Wouter & Matouschek, Niko, 2015. "Organizing to adapt and compete," LSE Research Online Documents on Economics 58647, London School of Economics and Political Science, LSE Library.
    8. 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.

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    More about this item

    Keywords

    sender-receiver games; information transmission; nestedness; inter- mediary; delegation; informed principal.;
    All these keywords.

    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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