Multidimensional Cheap Talk

39 Pages Posted: 15 Jun 2004

See all articles by Gilat Levy

Gilat Levy

London School of Economics & Political Science (LSE) - Department of Economics

Ronny Razin

London School of Economics & Political Science (LSE)

Date Written: May 2004

Abstract

In this Paper, we extend the cheap talk model of Crawford and Sobel (1982) to a multidimensional state space and policy space. We provide a characterization of equilibria. We focus on the question of feasibility of information transmission, for large degrees of conflict of interests between the sender and the receiver. We show that it is possible to construct equilibria with information transmission even for unboundedly large conflicts, but that any such equilibrium is based on knife-edge assumptions. We prove that influential equilibria are non-generic when the conflict between the sender and the receiver is large enough. Thus, adding more dimensions cannot improve upon information revelation when interests are too divergent.

Keywords: Cheap talk, political economy, lobbying

JEL Classification: D82

Suggested Citation

Levy, Gilat and Razin, Ronny, Multidimensional Cheap Talk (May 2004). Available at SSRN: https://ssrn.com/abstract=556725

Gilat Levy (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

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London WC2A 2AE
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+44 20 7955 6652 (Phone)

Ronny Razin

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom