Strategic Transmission of Correlated Information

Sergio Currarini, Giovanni Ursino and A K S Chand

The Economic Journal, 2020, vol. 130, issue 631, 2175-2206

Abstract: We consider a situation in which a decision-maker gathers information from imperfectly informed experts, receiving coarse signals about a uniform state of the world. Private information is (conditionally) correlated across players, and communication is cheap talk. We show that with two experts correlation unambiguously tightens the conditions on preferences for a truth-telling equilibrium. However, with multiple experts the effect of correlation on the incentives to report information truthfully can be non-monotonic: while little and large levels of correlation hinder truth-telling, intermediate levels may discipline experts’ equilibrium behaviour and foster truthful communication. We discuss the implications of our results for the political discussion in the presence of ‘selective exposure' to media, where similarity in preferences comes with higher correlation, and a trade-off between truth-telling incentives and informational content arises.

Date: 2020
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