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Strategic Information Transmission with Budget Constraint

  • A.K.S. Chand

    ()

    (Department of Economics, University Of Venice Ca’ Foscari)

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    In this paper, I discuss a Cheap Talk model that arises during the allocation of a limited budget to multiple Senders by a Receiver with private communication. The Receiver's utility is the sum of the utilities of the Senders. Considering quadratic utility functions, I show that there is no fully revealing equilibrium with budget constraint. I also show that a higher budget facilitates information transmission to the Receiver in terms of ex-ante expected utility by considering (1) an equilibrium where only one Sender reveals truthfully, (2) a symmetric equilibrium with two intervals and (3) a commitment strategy by the Receiver where only one Sender receives his desired amount. The commitment strategy is doing better than the other two types of equilibria for budget more than a particular value. This requires us to look for equilibria with higher number of intervals which does better than the commitment strategy.

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    File URL: http://www.unive.it/media/allegato/DIP/Economia/Working_papers/Working_papers_2012/WP_DSE_chand_19_12.pdf
    File Function: First version, 2012
    Download Restriction: no

    Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2012_19.

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    Length: 34
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:ven:wpaper:2012_19
    Contact details of provider: Postal: Cannaregio, S. Giobbe no 873 , 30121 Venezia
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    Web page: http://www.unive.it/dip.economia
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    1. Marco Battaglini, 2000. "Multiple Referrals and Multidimensional Cheap Talk," Econometric Society World Congress 2000 Contributed Papers 1557, Econometric Society.
    2. Farrell, J. & Gibbons, R., 1989. "Cheap Talk With Two Audiences," Working papers 518, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Takahashi, Satoru & Ambrus, Attila, 2008. "Multi-Sender Cheap Talk with Restricted State Spaces," Scholarly Articles 3200263, Harvard University Department of Economics.
    4. Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
    5. McGee, Andrew & Yang, Huanxing, 2013. "Cheap talk with two senders and complementary information," Games and Economic Behavior, Elsevier, vol. 79(C), pages 181-191.
    6. Ming Li, 2003. "To Disclose or Not to Disclose: Cheap Talk with Uncertain Biases," Working Papers 04003, Concordia University, Department of Economics, revised Aug 2004.
    7. Levy, Gilat & Razin, Ronny, 2004. "Multidimensional Cheap Talk," CEPR Discussion Papers 4393, C.E.P.R. Discussion Papers.
    8. Lars Frisell & Johan N. M. Lagerlöf, 2007. "A Model of Reputation in Cheap Talk," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(1), pages 49-70, 03.
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