Information Transmission in Nested Sender-Receiver Games

31 Pages Posted: 7 May 2013

See all articles by Ying Chen

Ying Chen

Johns Hopkins University - Department of Economics

Sidartha Gordon

Sciences Po, Department of Economics; University Paris-Dauphine

Date Written: April 5, 2013

Abstract

We introduce a "nestedness" relation for a general class of sender-receiver games and compare equilibrium properties, in particular the amount of information transmitted, across games that are nested. Roughly, game B is nested in game A if the players’s optimal actions are closer in game B. We show that under some conditions, more information is transmitted in the nested game in the sense that the receiver’s expected equilibrium payoff is higher. The results generalize the comparative statics and welfare comparisons with respect to preferences in the seminal paper of Crawford and Sobel (1982). We also derive new results with respect to changes in priors in addition to changes in preferences. We illustrate the usefulness of the results in three applications: (i) delegation to an intermediary with a different prior, (ii) the choice between centralization and delegation, and (iii) two-way communication with an informed principal.

Keywords: sender-receiver games, information transmission, nestedness, intermediary, delegation, informed principal

JEL Classification: D23, D82, D83

Suggested Citation

Chen, Ying and Gordon, Sidartha, Information Transmission in Nested Sender-Receiver Games (April 5, 2013). Available at SSRN: https://ssrn.com/abstract=2261442 or http://dx.doi.org/10.2139/ssrn.2261442

Ying Chen (Contact Author)

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States

Sidartha Gordon

Sciences Po, Department of Economics ( email )

28, rue des Saints peres
Paris, 75007
France

University Paris-Dauphine ( email )

Place du Marechal de Lattre Tassigny
Paris
France

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