Communication with Two-Sided Asymmetric Information

30 Pages Posted: 18 Feb 2009 Last revised: 28 Feb 2009

See all articles by Ying Chen

Ying Chen

Johns Hopkins University - Department of Economics

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

Chen, Ying, Communication with Two-Sided Asymmetric Information (February 2009). Available at SSRN: https://ssrn.com/abstract=1344818 or http://dx.doi.org/10.2139/ssrn.1344818

Ying Chen (Contact Author)

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States

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