Strategic Transmission of Imperfect Information: Why Revealing Evidence (Without Proof) Is Difficult
31 Pages Posted: 8 May 2019 Last revised: 20 Aug 2019
Date Written: August 20, 2019
We investigate cheap talk when an imperfectly-informed expert observes multiple binary signals about a continuous state of the world. The expert may report either information on each signal separately (direct transmission) or a summary statistics of her signals (indirect transmission) to a decision-maker. We first establish that fully informative equilibria exist if the conflict of interest is small. Otherwise, direct-transmission equilibria are uninformative, as not revealing part of the signals tightens—not loosens—the expert’s incentive compatibility constraint. On the contrary, indirect-transmission equilibria remain partially informative for intermediate conflicts of interest. Finally, we introduce the possibility for the expert to verify her signals. We show that, if the costs of verification are low, a fully informative direct-transmission equilibrium exists regardless of the conflict of interest. Our findings help understand why revealing evidence about an issue is difficult unless proof is provided.
Keywords: cheap talk, imperfect information, strategic communication, evidence, verification
JEL Classification: C72, D82, D83
Suggested Citation: Suggested Citation