Communication in the shadow of catastrophe

Dezsoe Szalay and Inga Deimen

No 16831, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the role of risk in strategic information transmission. We show that an increased likelihood of extreme states – heavier tails – decreases the amount of information transmission and makes it optimal to alter the mode of decision-making from communication to simple delegation. Moreover, the worst-case losses under communication increase relative to the worst-case losses under delegation when the tails get heavier.

Keywords: Strategic communication; Delegation; Authority; Organizations; Risk; Extreme events (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
Date: 2021-12
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