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Information acquisition and credibility in cheap talk
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Hidir, Sinem (2017) Information acquisition and credibility in cheap talk. Discussion Paper. Coventry: University of Warwick. Department of Economics. CRETA Discussion Paper Series (36). (Unpublished)
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Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
This paper explores the interaction between uncertain bias and endogeneous information acquisition in strategic communication. I consider an expert who is privately informed about his bias as well as about whether he is informed, in addition can also engage in costly information acquisition. In this setup, information acquisition simultaneously serves the purposes of getting informed and increasing credibility before communicating through cheap talk to a decision maker. I define the signaling and the intrinsic value of information and find the conditions under which a separating equilibrium can arise, which is the most informative as well as the welfare maximizing equilibrium. I solve for equilibria as a function of cost of information acquisition and show that communication is most precise with an initially uninformed expert at an intermediary cost value. The overall welfare is non-monotone in cost, and it increases when cost increases to enable separation. When covert information acquisition is considered, there is a tradeoff between less wasteful investment versus less communication precision compared to the overt case.
Item Type: | Working or Discussion Paper (Discussion Paper) | ||||||
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Subjects: | H Social Sciences > HB Economic Theory J Political Science > JF Political institutions (General) |
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Divisions: | Faculty of Social Sciences > Economics | ||||||
Library of Congress Subject Headings (LCSH): | Game theory, Coalitions -- Mathematical models, Information behavior -- Mathematical models, Decision making | ||||||
Series Name: | CRETA Discussion Paper Series | ||||||
Publisher: | University of Warwick. Department of Economics | ||||||
Place of Publication: | Coventry | ||||||
Official Date: | 2017 | ||||||
Dates: |
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Number: | 36 | ||||||
Number of Pages: | 32 | ||||||
Institution: | University of Warwick | ||||||
Status: | Not Peer Reviewed | ||||||
Publication Status: | Unpublished | ||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||
Date of first compliant deposit: | 5 January 2017 | ||||||
Date of first compliant Open Access: | 6 January 2017 | ||||||
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