Download This PaperInformation Design in Cheap Talk
23 Pages Posted: 13 May 2020
Date Written: April 18, 2020
Abstract
An uninformed sender chooses a publicly observable experiment and sends a message to a receiver after privately learning the experimental outcome. To design the optimal experiment, the sender faces a tension between acquiring more information and alleviating the conflict of interest. In the benchmark model, the optimal experiment generates a conclusive signal (conclusive good news) about the state in which the two parties’ interests coincide. When the choice of experiment is not publicly observable and the sender cannot commit to it, an informative equilibrium exists if and only if there exists an equilibrium where the sender chooses to become perfectly informed.
Keywords: Cheap talk, information design, truthful disclosure, conclusive good news
JEL Classification: D82, D83
Suggested Citation: Suggested Citation