Communication with Two-Sided Asymmetric Information
30 Pages Posted: 18 Feb 2009 Last revised: 28 Feb 2009
Date Written: February 2009
Abstract
Even though people routinely ask experts for advice, they often have private information as well. I study strategic communication when both the expert and the decision maker have private information. In one-way communication, non-monotone equilibria may arise (i.e., the expert conveys whether the state is extreme or moderate instead of low or high), even if preferences satisfy the single-crossing property. In two-way communication, the decision maker cannot credibly reveal her information when communicating first to the expert and hence benefits little from two-way sequential communication. This result provides another explanation for the "bottom up" arrangement of information flow in organizations.
Keywords: Cheap Talk, Asymmtric Information, Non-monotonicity, Two-way Communication
JEL Classification: D82, D83
Suggested Citation: Suggested Citation
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