Abstract

http://ssrn.com/abstract=2352037
 


 



Managerial Economics of Cheap Talk


Saori Chiba


Università Ca' Foscari Venezia - Department of Management

Kaiwen Leong


Nanyang Technological University (NTU)

November 1, 2013

Department of Management, Università Ca' Foscari Venezia Working Paper No. 2013/24

Abstract:     
Consider an uninformed decision maker (DM) who communicates with a partially informed speaker (S) through cheap talk. DM can choose a project to implement or the outside option of no project. We show that if the agents’ ex-ante rankings over projects do not coincide, then this conflict of interest can reduce S’s incentive to pander and hence facilitate information transmission. Intuitively, S’s ex-ante bias and the incentive to pander affect S’s information revelation in opposite directions and hence offset each other. We also explore the relationship between information transmission and managerial issues such as delegation, disclosure, and interpersonal authority.

Number of Pages in PDF File: 52

Keywords: Cheap Talk, Delegation, Disclosure, Interpersonal Authority, Pandering

JEL Classification: D82, D83, M10

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Date posted: November 10, 2013  

Suggested Citation

Chiba, Saori and Leong, Kaiwen, Managerial Economics of Cheap Talk (November 1, 2013). Department of Management, Università Ca' Foscari Venezia Working Paper No. 2013/24. Available at SSRN: http://ssrn.com/abstract=2352037

Contact Information

Saori Chiba (Contact Author)
Università Ca' Foscari Venezia - Department of Management ( email )
San Giobbe, Cannaregio 873
Venezia, 30121
Italy
Kaiwen Leong
Nanyang Technological University (NTU) ( email )
S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore
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