Persuasion by Cheap Talk

Archishman Chakraborty and Rick Harbaugh ()
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Archishman Chakraborty: Baruch College, City University of New York

No 2006-10, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: We consider the credibility, persuasiveness, and informativeness of multidimensional cheap talk by an expert to a decision maker. We find that an expert with state-independent preferences can always make credible comparative statements that trade off the expert's incentive to exaggerate on each dimension. Such communication benefits the expert -- cheap talk is "persuasive" -- if her preferences are quasiconvex. Communication benefits a decision maker by allowing for a more informed decision, but strategic interactions between multiple decision makers can reverse this gain. We apply these results to topics including media bias, advertising, product recommendations, voting, and auction disclosure.

Keywords: multidimensional cheap talk; media bias; stock analysts; comparative advertising; negative advertising; lobbying; transparency (search for similar items in EconPapers)
JEL-codes: L0 C72 D72 D82 (search for similar items in EconPapers)
Date: 2006-06, Revised 2009-10
Note: Formally circulated as Clearly Biased Experts
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Forthcoming in American Economic Review

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