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Cheap Talk with Outside Options

  • Saori Chiba

    ()

    (Dept. of Management, Università Ca' Foscari Venice)

  • Kaiwen Leong
  • Kaiwen Leong

    ()

    (Division of Economics, Nanyang Technological University)

In Crawford and Sobel (1982) (CS), a sender (S) uses cheap talk to persuade a receiver (R) to select an action as profitable to S as possible. This paper shows that the presence of an outside option Ð that is, allowing R to avoid taking any action, yielding state-independent reservation utilities to R and S Ð has an important qualitative impact on the results. Contrary to CS, in this model, the informativeness of communication is not always decreasing in the level of conflict of interest. Relatedly, communication can be more informative than in CS.

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File Function: First version, 2013
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Paper provided by Department of Management, Università Ca' Foscari Venezia in its series Working Papers with number 16.

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Length: 42 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:vnm:wpdman:52
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  1. Matthews, Steven A, 1989. "Veto Threats: Rhetoric in a Bargaining Game," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 347-69, May.
  2. J. Farrell, 2010. "Meaning and Credibility in Cheap Talk Games," Levine's Working Paper Archive 533, David K. Levine.
  3. Bernard Caillaud & Jean Tirole, 2006. "Consensus building: How to persuade a group," PSE Working Papers halshs-00590459, HAL.
  4. Eric Maskin, 2003. "The Politician and the Judge: Accountability in Government," Theory workshop papers 505798000000000076, UCLA Department of Economics.
  5. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  6. repec:hal:journl:hal-00461108 is not listed on IDEAS
  7. Ying Chen & Navin Kartik & Joel Sobel, 2008. "Selecting Cheap-Talk Equilibria," Econometrica, Econometric Society, vol. 76(1), pages 117-136, 01.
  8. Adam Brandenburger & Ben Polak, 1996. "When Managers Cover Their Posteriors: Making the Decisions the Market Wants to See," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 523-541, Autumn.
  9. Dessein, Wouter, 2002. "Authority and Communication in Organizations," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 811-38, October.
  10. Augustin Landier & David Sraer & David Thesmar, 2009. "Optimal Dissent in Organizations," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 761-794.
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