Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2018

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Monotonic Cheap Talk

Shih En Lu*

Date: 2018-05-11 12:00 pm – 12:30 pm
Last modified: 2018-04-27

Abstract


This paper studies monotonic equilibria in a multi-sender version of Crawford and Sobel's (1982) cheap talk model, i.e. pure-strategy equilibria where senders' strategies are weakly monotonic in the state and where the receiver's strategy is strictly monotonic in the senders' messages. Monotonic equilibria have interval form, are bounded away from full revelation, and are straightforward to compute. When senders can be ranked according to bias: (i) in monotonic equilibria, senders most biased toward larger actions are informative when the receiver's desired action is smallest, and vice versa; and (ii) monotonic equilibria can be made collusion-proof by appropriately placing the receiver's off-path actions. If assumed alone, weak monotonicity of sender strategies generally has only a weak implication for the realized state-to-action function in a pure-strategy equilibrium. Strict monotonicity of the receiver's strategy is motivated by the possibility of misunderstanding.

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