Gurus, Opinion Polls and Social Learning

Nicolas Melissas

No 703, Working Papers from Centro de Investigacion Economica, ITAM

Abstract: This paper analyzes cheap talk in an investment model with information externalities. In contrast to Gossner and Melissas (2006), I allow for (i) competition effects, (ii) positive network externalities and (iii) more than one interviewed player. In the presence of competition effects, a player will never truthfully reveal her information about the realized state of the world. In the presence of positive network externalities, however, there exists a parameter range where, under mild additional conditions, the unique equilibrium is the separating one. Finally, using numerical computations, I show that for a sufficiently large number of interviewed players there exists a separating equilibrium in my entire parameter range.

Keywords: Cheap Talk; Information Externality; Social Learning; Herd Behaviour (search for similar items in EconPapers)
JEL-codes: D62 D83 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2007-01
New Economics Papers: this item is included in nep-cbe and nep-net
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http://ftp.itam.mx/pub/academico/inves/melissas/07-03.pdf First version, 2007 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cie:wpaper:0703

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