Persuasion by Cheap Talk
30 Pages Posted: 22 Mar 2006 Last revised: 13 May 2014
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: Suggested Citation
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