Persuasion by Cheap Talk

Archishman Chakraborty and Rick Harbaugh ()

American Economic Review, 2010, vol. 100, issue 5, 2361-82

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 product recommendations, voting, auction disclosure, and advertising. (JEL D44, D72, D82, D83, M37)

Date: 2010
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