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Cheap Talk with Outside Options

Saori Chiba (), Kaiwen Leong and Kaiwen Leong ()
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Kaiwen Leong: Division of Economics, Nanyang Technological University

No 16, Working Papers from Department of Management, Università Ca' Foscari Venezia

Abstract: In Crawford and Sobel (1982) (CS), a sender (S) uses cheap talk to persuade a receiver (R) to select an action as profitable to S as possible. This paper shows that the presence of an outside option Ð that is, allowing R to avoid taking any action, yielding state-independent reservation utilities to R and S Ð has an important qualitative impact on the results. Contrary to CS, in this model, the informativeness of communication is not always decreasing in the level of conflict of interest. Relatedly, communication can be more informative than in CS.

Keywords: Cheap Talk; Information Transmission; Experts (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2013-09
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

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