Tailored Cheap Talk

Pedro M. Gardete and Yakov Bart
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Pedro M. Gardete: Stanford University
Yakov Bart: Northeastern University

Research Papers from Stanford University, Graduate School of Business

Abstract: We consider a cheap-talk game in which the persuader is able to collect information about the receiver's preferences in order to tailor communication and induce a favorable action. We find that the sender prefers not to learn the receiver's preferences with certainty, but to remain in a state of partial willful ignorance. The receiver prefers complete privacy except when information is necessary to induce communication from the sender. Surprisingly, joint welfare is always maximized by the sender's first-best level of information acquisition. The implications of our results are discussed in the contexts of online advertising, sales, dating and job search.

Date: 2016-03
New Economics Papers: this item is included in nep-com, nep-exp and nep-mic
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