Strategic Transmission of Imperfect Information: Why Revealing Evidence (Without Proof) Is Difficult

31 Pages Posted: 8 May 2019 Last revised: 20 Aug 2019

See all articles by Manuel Foerster

Manuel Foerster

University of Hamburg - Department of Economics

Date Written: August 20, 2019

Abstract

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

Foerster, Manuel, Strategic Transmission of Imperfect Information: Why Revealing Evidence (Without Proof) Is Difficult (August 20, 2019). Available at SSRN: https://ssrn.com/abstract=3369074 or http://dx.doi.org/10.2139/ssrn.3369074

Manuel Foerster (Contact Author)

University of Hamburg - Department of Economics ( email )

Von-Melle-Park 5
room 2128 C rise
Hamburg, 20146
Germany

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