Communication and Binary Decisions: Is it Better to Communicate?

17 Pages Posted: 3 Apr 2010

See all articles by Frederic Loss

Frederic Loss

London School of Economics & Political Science (LSE) - Financial Markets Group

Estelle Malavolti-Grimal

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ)

Thibaud Verge

University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO)

Date Written: March 29, 2010

Abstract

We study information transmission between informed experts and an uninformed decision-maker who only takes binary decisions. In the single expert case, we show that information transmission can only be relatively poor. Hence, even sophiscated communication games do not yield equilibria which (ex ante) outperform delegation. Referring to multiple experts allow the decision-maker to obtain more information. However, this information can never be perfect, and sophisticated communication games, for instance with multilateral, multistage communication, do not outperform simple communication methods.

Keywords: Communication, Delegation, Experts, Information transmission, Cheap-talk

JEL Classification: C72, D82, D83

Suggested Citation

Loss, Frederic and Malavolti-Grimal, Estelle and Verge, Thibaud, Communication and Binary Decisions: Is it Better to Communicate? (March 29, 2010). Available at SSRN: https://ssrn.com/abstract=1580040 or http://dx.doi.org/10.2139/ssrn.1580040

Frederic Loss (Contact Author)

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 2078523569 (Phone)

Estelle Malavolti-Grimal

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )

Manufacture des Tabacs
21 Allees de Brienne Universite des Sciences Sociales
31000 Toulouse
France
+33 5 61 12 85 83 (Phone)
+33 5 61 22 55 63 (Fax)

Thibaud Verge

University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO) ( email )

12 Priory Road
Bristol BS8 1TN
United Kingdom
+44 117 928 9844 (Phone)
+44 117 928 8577 (Fax)

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