The Value of Mediated Communication

Andrés Salamanca Lugo ()

Working Papers from HAL

Abstract: This paper characterizes optimal communication equilibria (which models mediation) in sender-receiver games. We assume that communication devices are designed to maximize the ex-ante welfare of the informed party (i.e., the sender). Communication equilibria are defined by a set of linear incentive constraints. The associated dual variables of these constraints yield shadow prices that are used to get "virtual utility functions" that intuitively characterize the signaling costs of incentive compatibility. A key result is a characterization of the value of an optimal communication equilibrium (value of mediation) from the concavification of the sender's indirect virtual utility function over prior beliefs. Using this result we provide necessary and sufficient conditions for a communication equilibrium to be optimal. An additional result establishes a bound on the number of messages that the sender needs to convey in order to achieve the value of mediation.

Keywords: Mediated communication; Incentive compatibility; Virtual utility; Concavification (search for similar items in EconPapers)
Date: 2016-07-05
New Economics Papers: this item is included in nep-mic and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-01289379v5
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The value of mediated communication (2021)
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