Comparative Cheap Talk

29 Pages Posted: 26 Apr 2004

See all articles by Archishman Chakraborty

Archishman Chakraborty

York University - Schulich School of Business

Rick Harbaugh

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy; Indiana University - Department of Economics

Date Written: March 2005

Abstract

When are comparative statements credible? For instance, when can a professor rank different students for an employer, or a stock analyst rank different stocks for a client? We show that simple complementarity conditions ensure that an expert with private information about multiple issues can credibly rank the issues for a decision maker. By restricting the expert's ability to exaggerate, multidimensional cheap talk of this form permits communication when it would not be credible in a single dimension. The communication gains can be substantial with even a couple of issues, and the complete ranking is asymptotically equivalent to full revelation as the number of issues becomes large. Nevertheless, partial rankings are sometimes more credible and/or more profitable for the expert than the complete ranking. We confirm the robustness of comparative cheap talk to asymmetries that are not too large. Moreover, we show that for a sufficiently large number of independent issues there are always some issues sufficiently symmetric to permit influential cheap talk.

Keywords: Multidimensional cheap talk, complementarities

JEL Classification: D82, D74, D72, C72

Suggested Citation

Chakraborty, Archishman and Harbaugh, Rick, Comparative Cheap Talk (March 2005). Available at SSRN: https://ssrn.com/abstract=535763 or http://dx.doi.org/10.2139/ssrn.535763

Archishman Chakraborty

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://www.yorku.ca/archish/

Rick Harbaugh (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-855-2777 (Phone)
812-855-3354 (Fax)

HOME PAGE: http://www.bus.indiana.edu/riharbau/

Indiana University - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
165
Abstract Views
2,782
rank
202,854
PlumX Metrics