Persuasion by Cheap Talk

30 Pages Posted: 22 Mar 2006 Last revised: 13 May 2014

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: July 1, 2007

Abstract

We consider the credibility, persuasiveness, and informativeness of multi-dimensional cheap talk by an expert to a decision maker. We find that an expert with state-independent preferences can always make credible comparative statements that trade off the expert's incentive to exaggerate on each dimension. Such communication benefits the expert -- cheap talk is "persuasive" -- if her preferences are quasiconvex. Communication benefits a decision maker by allowing for a more informed decision, but strategic interactions between multiple decision makers can reverse this gain. We apply these results to topics including media bias, advertising, product recommendations, voting, and auction disclosure.

Keywords: multidimensional cheap talk, transparent motives, media bias, advertising, voting, auctions

JEL Classification: C72, D72, D82

Suggested Citation

Chakraborty, Archishman and Harbaugh, Rick, Persuasion by Cheap Talk (July 1, 2007). Available at SSRN: https://ssrn.com/abstract=889190 or http://dx.doi.org/10.2139/ssrn.889190

Archishman Chakraborty (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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

Rick Harbaugh

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

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