Hertel, Jo and Smith, John (2009): Not so cheap talk: a model of advice with communication costs.
Download (184Kb) | Preview
We model a game similar to the interaction between an academic advisor and advisee. Like the classic cheap talk setup, an informed player sends information to an uninformed receiver who is to take an action which affects the payoffs of both sender and receiver. However, unlike the classic cheap talk setup, the preferences regarding the receiver's actions are identical for both sender and receiver. Additionally, the sender incurs a communication cost which is increasing in the complexity of the message sent. We characterize the resulting equilibria. Under an additional out-of-equilibrium condition (Condition L), if preferences for sender and receiver are identical then the only equilibria are the most informative, feasible ones. A similar result appears in Chen, Kartik and Sobel (2008) when their No Incentive to Separate (NITS) condition is applied to the case where communication is costless but preferences diverge. Additionally, we model the competency of the advisee by the probability that the action is selected by mistake. We show that the informativeness of the sender is decreasing in the likelihood of the mistake. When the preferences between players diverge and when there are communication costs, we are not guaranteed uniqueness and we provide an example where an increase in communication costs can improve communication.
|Item Type:||MPRA Paper|
|Original Title:||Not so cheap talk: a model of advice with communication costs|
|Keywords:||complexity, communication, cheap talk|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
|Depositing User:||John Smith|
|Date Deposited:||02. Sep 2009 07:17|
|Last Modified:||19. Feb 2013 08:23|
Austin-Smith, David (1994): "Strategic Transmission of Costly Information," Econometrica, 62(4): 955-963.
Banks, Jeffrey and Sobel, Joel (1987): "Equilibrium Selection in Signalling Games," Econometrica, 55, 647-661.
Blume, Andreas, Board, Oliver and Kawamura, Kohei (2007) "Noisy talk," Theoretical Economics, 2: 395-440.
Blume, Andreas, DeJong, Douglas, Kim, Yong-Gwan and Sprinkle, Jeffrey (1998): "Experimental evidence on the evolution of meaning of messages in sender-reciever games," American Economic Review, 88: 1323-1340.
Blume, Andreas, DeJong, Douglas, Kim, Yong-Gwan and Sprinkle, Jeffrey (2001): "Evolution of Communication with Partial Common Interest," Games and Economic Behavior, 37: 79-120.
Cai, Hongbin and Wang, Joseph Tao-Yi (2006): "Overcommunication in strategic information transmission games," Games and Economic Behavior, 56: 7-36.
Calvo-Armengol, Antoni, de Marti, Joan and Prat, Andrea (2009): "Endogenous Communication in Complex Organizations," Working paper, Autonoma de Barcelona, Pompeu Fabra and London School of Economics.
Chen, Ying, Kartik, Navin and Sobel, Joel (2008): "Selecting Cheap-Talk Equilibria," Econometrica, 76(1): 117-136.
Corcoran, Mary and Clark, Shirley (1984): "Professional Socialization and Contemporary Career Attitudes of Three Faculty Generations," Research in Higher Education, 20(2): 131-153.
Crawford, Vincent and Sobel, Joel (1982): "Strategic Information Transmission," Econometrica, 50(6): 1431-1451.
Cremer, Jacques, Garicano, Luis and Prat, Andrea (2007): "Language and the Theory of the Firm," Quarterly Journal of Economics, 117: 373-407.
Cho, In-Koo and Kreps, David (1986): "Signaling Games and Stable Equilibria," Quarterly Journal of Economics, 102: 179-221.
Dewatripoint, Mathias and Tirole, Jean (2005): "Modes of Communication," Journal of Political Economy, 113(6): 1217-1238.
Farrell, Joseph (1993): "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, 5, 514-531.
Fischer, Paul and Stocken, Phillip (2001): "Imperfect Information and Credible Communication," Journal of Accounting Research, 39(1): 119-134.
Green, Steven and Bauer, Talya (1995): "Supervisory Mentoring by Advisors: Relationships with Doctoral Student Potential, Productivity and Commitment," Personnel Psychology, 48(3): 537-561.
Hollingsworth, Merris and Fassinger, Ruth (2002): "The Role of Faculty Mentors in the Research Training of Counceling Psychology Doctoral Students," Journal of Counceling Psychology, 49(3): 324-330.
Kawagoe, Toshiji and Takizawa, Hirokazu (2008): "Equilibrium refinement vs.level-k analysis: An experimental study of cheap-talk games with private information," Games and Economic Behavior, forthcoming.
Kohlberg, Elon and Mertens, Jean-Francois (1987): "On the Strategic Stability of Equilibria," Econometrica, 54, 1003-1037.
Knox, Sarah, Schlosser, Lewis, Pruitt, Nathan and Hill, Clara (2006): "A Qualitative Examination of Graduate Advising Relationships: the Advisor Perspective," Counceling Psychologist, 34(4): 489-518.
Lipman, Barton (2006): "Why is Language Vague?" Working paper, Boston University.
Matthews, Steven, Okuno-Fujiwara, Masahiro and Postlewaite, Andrew (1991): "Refining Cheap-Talk Equilibria," Journal of Economic Theory, 55: 247-273.
Morgan, John and Stocken, Phillip (2003): "An Analysis of Stock Recommendations," RAND Journal of Economics, 34(1): 183-203.
Morris, Steven (2001): "Political Correctness," Journal of Political Economy, 109(2): 231-265.
Schlosser, Lewis and Gelso, Charles (2001): "Measuring the Working Alliance in Advisor-Advisee Relationships in Graduate School," Journal of Counceling Psychology, 48(2): 157-167.
Schlosser, Lewis and Kahn, Jeffrey (2007): "Dyadic Perspectives on Advisor-Advisee Relationships in Counceling Psychology Doctoral Programs," Journal of Counceling Psychology, 54(2): 211-217.
Schlosser, Lewis, Knox, Sara, Moskovitz, Alissa and Hill, Clara (2003): "A Qualitative Examination of Graduate Advising Relationships: The Advisee Perspective," Journal of Counceling Psychology, 50(2): 178-188.
Spector, David (2000): "Pure Communication Between Agents with Close Preferences," Economics Letters, 66: 171-178.