Communication with Two-sided Asymmetric Information
Ying Chen*
Date: 2009-05-16 3:00 pm – 3:30 pm
Last modified: 2009-04-15
Abstract
Even though people routinely ask experts for advice, they often have private information as well. I study strategic communication when both the expert and the decision maker have private information. In one-way communication, non-monotone equilibria may arise (i.e., the expert conveys whether the state is extreme or moderate instead of low or high), even if preferences satisfy the single-crossing property. In two-way communication, the decision maker cannot credibly reveal her information when communicating first to the expert and hence benefits little from two-way sequential communication. This result provides another explanation for the “bottom up” arrangement of information flow in organizations.