Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2011

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Dynamic Strategic Information Transmission

Andrea Wilson*, Vasiliki Skreta, Mikhail Golosov, Aleh Tsyvinski

Date: 2011-05-13 5:00 pm – 5:30 pm
Last modified: 2011-04-09

Abstract


This paper studies strategic information transmission in a dynamic environment, where a privately informed expert and a decision maker interact for a finite number of periods. Our theoretical results argue that the dynamic cheap talk games are fundamentally different from Crawford-Sobel's static setup. In a multi-period setting, incentives between the expert and DM effectively become correlated, in a way that allows for much more information to be revealed (for example, through the use of "trigger strategies", in which the expert promises better advice in the future if the DM chooses an action he likes now). Our main result states that, in contrast to any result in the static literature, full information revelation is possible in dynamic cheap-talk games.