Premium
A Model of Reputation in Cheap Talk *
Author(s) -
Frisell Lars,
Lagerlöf Johan N. M.
Publication year - 2007
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.1467-9442.2007.00480.x
Subject(s) - communication source , cheap talk , reputation , credibility , incentive , transparency (behavior) , context (archaeology) , economics , microeconomics , welfare , population , public economics , computer science , political science , law , telecommunications , computer security , sociology , market economy , paleontology , demography , biology
Abstract We study a dynamic game of advice where the sender's preferences are unknown to the receiver. The novel feature of the model is that there is more than one type of biased sender. We show that the more equal the proportions of different biases in the sender population, the greater the credibility of the information transmitted. Somewhat surprisingly, however, we also find that the receiver does not benefit from this equality. We discuss our results in the context of political lobbying and show that institutions that increase transparency lower lobbyists' incentives for truthtelling, but unambiguously promote the policymaker's welfare.