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Cheap Talk With Endogenous Conflict of Interest
Author(s) -
Antić Nemanja,
Persico Nicola
Publication year - 2020
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta14953
Subject(s) - communication source , cheap talk , mathematical economics , principal (computer security) , competitive equilibrium , economics , microeconomics , signaling game , sign (mathematics) , information transmission , inverse demand function , set (abstract data type) , complete information , computer science , econometrics , demand curve , mathematics , computer security , telecommunications , mathematical analysis , computer network , programming language
In a cheap‐talk setting where the conflict of interest between sender and receiver is determined endogenously by the choice of parameters θ i for each agent i , conditions are provided that determine the sign of each agent's inverse demand for θ without assuming that the most informative equilibrium will necessarily be played in the cheap talk game. For two popular functional forms of payoffs, we derive analytically tractable approximations for agent i 's demand for θ . In an application where the θi 's are purchased on a competitive market, we provide conditions for a competitive equilibrium to feature maximal information transmission. In a principal–agent application where the agent's θ is set by the principal, our results show that information transmission will be partial. We consider extensions where: (1) the θ 's are acquired covertly rather than overtly and (2) the θ 's are traded after the sender has received the information.