Abstract

http://ssrn.com/abstract=2332689
 


 



Cheap Talk with Outside Options


Saori Chiba


Università Ca' Foscari Venezia - Department of Management

Kaiwen Leong


Nanyang Technological University (NTU)

September 2013

Department of Management, Università Ca' Foscari Venezia Working Paper No. 16/2013

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 – that is, allowing R to avoid taking any action, yielding state-independent reservation utilities to R and S – 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.

Number of Pages in PDF File: 42

Keywords: Cheap Talk, Information Transmission, Experts

JEL Classification: D82, D83

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Date posted: September 29, 2013  

Suggested Citation

Chiba, Saori and Leong, Kaiwen, Cheap Talk with Outside Options (September 2013). Department of Management, Università Ca' Foscari Venezia Working Paper No. 16/2013. Available at SSRN: http://ssrn.com/abstract=2332689 or http://dx.doi.org/10.2139/ssrn.2332689

Contact Information

Saori Chiba (Contact Author)
Università Ca' Foscari Venezia - Department of Management ( email )
Dorsoduro 3246
Venezia, 30123
Italy
Kaiwen Leong
Nanyang Technological University (NTU) ( email )
S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore
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