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Endogenous ambiguity in cheap talk

Christian Kellner and Mark Le Quement

Journal of Economic Theory, 2018, vol. 173, issue C, 1-17

Abstract: This paper proposes a model of ambiguous language. We consider a simple cheap talk game in which a sender who faces an ambiguity averse receiver is able to perform ambiguous randomization, i.e. to randomize according to unknown probabilities. We show that for any standard influential communication equilibrium there exists an equilibrium featuring an ambiguous communication strategy which Pareto-dominates it in terms of consistent planning ex ante utilities. Ambiguity, by triggering worst-case decision-making by the receiver, shifts the latter's response to information towards the sender's ideal action, thus encouraging more information transmission.

Keywords: Cheap talk; Ambiguity (search for similar items in EconPapers)
JEL-codes: D81 D83 (search for similar items in EconPapers)
Date: 2018
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