Strategic Information Transmission with Budget Constraint
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.
|Date of creation:||2012|
|Date of revision:|
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