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Social distancing measures are typically recommended to contain the spread of infectious diseases. To improve the public's voluntary compliance, governments and health authorities seek to publicize timely information about the pandemic. Yet social planners may exaggerate or downplay their private information about the disease's severity to elicit their preferred level of social distancing. This is because the relative weight they assign to the costs of isolation over public health may be unbalanced, and people may not fully consider how their social distancing may influence others' infection risk. Consequently, messages and claims about the pandemic may be distrusted. The author investigates whether and when communication can be fully or partially credible despite apparent incentives for misrepresentation. The author finds that a government would communicate truthfully in equilibrium if and only if the disease severity levels are not too close to each other in the public's prior belief. Nevertheless, an increasing difference between the severity levels need not enhance the credibility of communication. Greater communication credibility may hurt social welfare. Moreover, as the government becomes more concerned about the costs of social distancing, its equilibrium messages may become more or less trustworthy. The article's results can benefit social planners and users of their messages (e.g., analysts, researchers, investors). [ABSTRACT FROM AUTHOR]

Problem definition: When a firm (buyer) outsources the production of a new product/component to a supplier subject to random yield, a major challenge is that the supplier's yield is usually private information. In practice, yield information is often shared via nonbinding communication—for example, a supplier self-assessment report. We examine whether such communication can be truthful and credible. Methodology/results: We analyze a cheap-talk game in which, given a simple contract that specifies the prices for each unit ordered and for each effective unit delivered, the supplier first communicates its yield level, and then the buyer determines an order quantity. We prove that truthful communication can emerge in equilibrium. To do so, we first show that if knowing the supplier's type, the buyer will either inflate or reduce the order quantity to cope with a lower yield, depending on the product's market potential. Under asymmetric information, the supplier will truthfully communicate its type if (i) the buyer with a high market potential intends to inflate the order quantity for a lower yield, but the buyer with a low market potential prefers to do the reverse; and (ii) the supplier is uncertain about the product's market potential, which is the buyer's private information, and anticipates that a hard-to-make product is more likely to have a higher market potential. Managerial implications: Truthful cheap-talk communication can emerge in equilibrium when the product's market size and yield are negatively correlated. Truthful communication always benefits the buyer and consumers and may benefit the supplier if the product has sufficient market potential and the supplier's production cost is not too high. Moreover, the buyer can be better off paying more for the input quantity (although part of the output is defective) or paying a higher wholesale rate if the adjustment in payment terms enhances communication credibility. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2023.0089. [ABSTRACT FROM AUTHOR]

This article studies the incentives for interim voluntary disclosure of verifiable information in probabilistic all-pay contests with two-sided incomplete information. Private information may concern marginal cost, valuations, and ability. Our main result says that, if the contest is uniformly asymmetric , then full revelation is the unique perfect Bayesian equilibrium outcome. This is so because the weakest type of the underdog reveals her type in an attempt to moderate the favourite, while the strongest type of the favourite tries to discourage the underdog—so that the contest unravels. This strong-form disclosure principle is robust with respect to correlation, partitional evidence, randomized disclosures, sequential moves, and continuous type spaces. Moreover, the assumption of uniform asymmetry is not needed when incomplete information is one-sided. However, the principle may break down when type distributions are too similar, contestants possess commitment power, or information is unverifiable. In fact, cheap talk will always be ignored, even if mediated by a trustworthy third party. [ABSTRACT FROM AUTHOR]

Recent years have seen a growth in customized products and services. As a prerequisite for customization, private information on individual customers' quality preferences needs to be uncovered. Sellers can listen to customers about their stated or self-reported preferences through direct communication (e.g., conversation, survey). Alternatively, customer preferences can be inferred from their behavior when they are given the rights to self-design the quality. In this research we endogenize the viability of customization by investigating whether and when customers may reveal their stated/inferred preferences truthfully. We find that, for either preference-learning approach, customers would voice their preferences faithfully if and only if they are sufficiently heterogenous. Equilibrium preference revelation, and hence endogenous customization, tend to be sustained by intermediate seller bargaining power or nonextreme production/selling costs. We examine how the preference-learning approaches may differ in the endogenous feasibility of customization, equilibrium qualities, and the parties' expected payoffs. We show that giving up the design right need not always be harmful for the seller, and gaining it can make the buyers worse off, especially when fixed costs of customization are considered. This paper was accepted by Eric Anderson, marketing. Funding: This work was supported by a DAG grant offered by the Hong Kong Research Grant Council. [ABSTRACT FROM AUTHOR]

A Bayesian agent experiences gain–loss utility each period over changes in belief about future consumption (news utility) with diminishing sensitivity over the magnitude of news. Diminishing sensitivity induces a preference over news skewness: gradual bad news, one‐shot good news is worse than one‐shot resolution, which is in turn worse than gradual good news, one‐shot bad news. So the agent's preference between gradual information and one‐shot resolution can depend on his consumption ranking of different states. In a dynamic cheap‐talk framework where a benevolent sender communicates the state over multiple periods, the babbling equilibrium is essentially unique when the receiver is not loss averse. Contrary to the commitment case, more loss‐averse receivers may enjoy higher news utility in equilibrium. We characterize the family of gradual good‐news equilibria when facing such receivers and find that the sender conveys progressively larger pieces of good news. [ABSTRACT FROM AUTHOR]

We develop a model of cheap talk with transparent and monotone motives from a seller to an informed buyer. By transparent and monotone motives, we mean that the seller's preference does not depend on the state of the world and is increasing in the choice(s) of the buyer regardless of the state of the world. We first show that if the buyer is completely uninformed, only the babbling equilibrium exists. Then, we obtain our main result that even if the buyer has the slightest information, full revelation can be supported by using the crosschecking strategy of the buyer if and only if the seller has a CARA (constant absolute risk aversion) utility function unless the buyer has too much information. In this equilibrium, the buyer can punish the seller who sends a message far above the buyer's information by ignoring the seller's message. Paradoxically, no information and too much information of the buyer both eliminate the fully revealing equilibrium with the crosschecking strategy. We also obtain a counterintuitive result that the seller prefers a more informed buyer than a less informed buyer. [ABSTRACT FROM AUTHOR]

A decision maker (DM) must choose between two projects or decide on no project. The expected benefits of these projects are correlated. The DM seeks advice from an agent with private information about the projects' benefits. However, the agent's divergent preferences for projects and lack of consideration for the DM's implementation costs may introduce two types of biases: project bias, favoring the agent's project, or pandering bias, favoring the project preferred by the DM. Our findings reveal that project correlation leads to these biases countervailing each other, facilitating the transmission of information. The agent typically recommends a project based on private information to dissuade the DM from choosing no project, as this would be detrimental to the agent. Additionally, we explore optimal delegation within organizations. In contrast to the prevailing literature advocating for delegation to biased agents for enhanced information elicitation, our study suggests limited benefits in the context of project correlation. [ABSTRACT FROM AUTHOR]

The central puzzle of persuasion is why a receiver would listen to a sender who they know is trying to change their beliefs or behavior. This article summarizes five approaches to solving this puzzle: (1) some messages are easier to send for those with favorable information (costly signaling), (2) the sender and receiver have common interest, (3) the sender messages are verifiable information, (4) the sender cares about their reputation for competence/honesty, and (5) the sender can commit to a messaging strategy (often called ‘Bayesian Persuasion’). After reviewing these approaches with common notation, I discuss which provide insight into prominent empirical findings on campaigns, partisan media, and lobbying. While models focusing on commitment have rapidly become prominent (if not dominant) in the recent theoretical literature on persuasion in political science and economics, the insights they provide are primarily technical, and are not particularly well-suited to explaining most of these phenomena.

Parallel pricing refers to the practice of firms making independent pricing decisions to match each other' prices. This paper provides plausible economic intuitions about the market characteristics that affect the emergence and persistence of airline parallel pricing behavior by reviewing and synthesizing the relevant factors identified in the industrial organization literature as influencing cooperative outcomes or tacit collusion. One of the key findings of this paper is that the combination of high price transparency, quick price response, and repeated interactions among competing airlines can make parallel pricing as a self-evident outcome, even in the presence of information asymmetries, cost discrepancies, variations in capacity and service quality, as well as fierce market competition. Another finding is that as personalized pricing becomes more prevalent, the likelihood of success of parallel pricing may decrease. It remains unclear what other forms of cooperative outcomes will emerge as the industry continues to adapt to changing technological and market landscapes. With these findings, this paper contributes to the groundwork for developing a comprehensive model of parallel pricing in the airline industry. [ABSTRACT FROM AUTHOR]

I study incentives for communication and policymaking in the presence of information asymmetry and constraints on the set of feasible policies. An informed and an uninformed agent both take decisions in a coordination game such that their actions exhibit positive spillover and are imperfectly substitutable. When agents communicate via cheap talk prior to the coordination stage, there is full information revelation as long as constraints are not binding. When constraints bind, communication results in threshold equilibria and partial revelation of information. The most informative threshold equilibrium maximizes the welfare of both agents. This paper is the first in the literature to establish a relationship between action constraints and incentives for strategic communication. [ABSTRACT FROM AUTHOR]

We consider the problem of a decision-maker who seeks for advice from several experts. The experts have reputation concerns which generate incentives to herd on the prior belief about the state of the world. We address the following question: Should the experts be allowed to exchange their information before providing advice ("collective expertise") or not ("independent expertise")? We show that collective expertise is more informative than independent expertise under low prior uncertainty about the state and less informative otherwise. We also argue that collective expertise gains advantage as the number of experts grows. [ABSTRACT FROM AUTHOR]

An equilibrium is communication-proof if it is unaffected by new opportunities to communicate and renegotiate. We characterize the set of equilibria of coordination games with pre-play communication in which players have private preferences over the coordinated outcomes. The set of communication-proof equilibria is a small and relatively homogeneous subset of the set of qualitatively diverse Bayesian Nash equilibria. Under a communication-proof equilibrium, players never miscoordinate, play their jointly preferred outcome whenever there is one, and communicate only the ordinal part of their preferences. Moreover, such equilibria are robust to changes in players' beliefs and interim Pareto efficient. [ABSTRACT FROM AUTHOR]

When entrepreneurs express their ambitions to achieve extraordinary financial growth, it may signal growth potential to early-stage investors. However, as this study proposes, promising overly high growth ambitions might backfire for entrepreneurs—dismissed as cheap talk and even penalized due to investors' credibility concerns. Therefore, entrepreneurs may need to complement their high ambitions with costly signals, such as citing their rich experiences or patents. Such costly signals can serve as credibility buffers and transform high ambitions from cheap talk into credible signals. Two empirical studies, based on campaign data from an equity crowdfunding setting and a conjoint experiment, support these arguments. [ABSTRACT FROM AUTHOR]

Research Summary: In this article, we examine under what conditions CEO activism—the practice of corporate leaders to take public stances on sociopolitical issues—can create firm value. In our model consumers care about the type of firm they buy from, but also understand that corporate leaders can make false or misleading statements to pander to valuable demographics. We show that, although the profitability of CEO activism is severely compromised by this wokewashing, under some conditions credible, value‐enhancing sociopolitical communications can still take place. We characterize (i) when corporate leaders prefer to stay silent; (ii) when wokewashing is so widespread that no credible communication is possible; and (iii) when instead some credible communication can take place. We also show how an intrinsically motivated CEO can destroy or increase firm value. Managerial Summary: Many corporate leaders take public stances on sociopolitical issues and observers suggest that this practice can sometimes create firm value. A problem with the idea, however, is that, if taking a certain stance is indeed value enhancing, then many other CEOs may be tempted to take the same stance opportunistically. In this article, we study how CEO activism can be profitable when wokewashing is a real concern. We show that credible, value‐enhancing sociopolitical communications require controversial messages, as significant opposition from consumers with different worldviews is necessary to ensure the credibility of communications. Far from being a "bug," controversy is a feature of credible CEO activism. We also demonstrate that a CEO's intrinsic motivation to take a stand can sometimes create value by making communications more credible. Obliquely, then, a CEO not primarily motivated by profits may be the best at maximizing profits. [ABSTRACT FROM AUTHOR]

We consider a version of the Battle of the Sexes with private information and allow cheap talk regarding the players' types before the game. We show that a desirable type-coordination property is achieved at the unique fully revealing symmetric equilibrium (when it exists). Type-coordination is also obtained in a partially revealing equilibrium that exists when the fully revealing equilibrium does not. We further prove that truthfully revealed messages, followed by actions that depend meaningfully on these messages, are not equilibrium profiles with one-sided cheap talk. Finally, fully revealing equilibria do not exist under sequential communication either. [ABSTRACT FROM AUTHOR]

In our cheap-talk setting, an expert privately observes multiple binary signals, her soft evidence, about a continuous state of the world and then communicates with a decision-maker. While direct transmission of evidence entails communicating the underlying signals, indirect transmission of evidence entails communicating a summary statistic of her evidence. We first establish that fully informative equilibria exist if the conflict of interest is small. Otherwise, direct transmission of evidence is impossible, as withholding one part of the soft evidence in the communication necessarily induces incentives to manipulate the report on the other part. On the contrary, indirect transmission of evidence remains partially informative for intermediate conflicts of interest. Finally, we introduce the possibility of certification. We show that, if the costs of certification are low, the expert can fully reveal her evidence regardless of the conflict of interest. [ABSTRACT FROM AUTHOR]

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Does adding a third-party player influence the tendency to lie? Lies often affect more than just two parties. The sender is often not the only beneficiary of the lie, and the receiver is often not the only person harmed. In this paper, we study the effect of introducing an uninvolved third party on people's tendency to behave dishonestly. This research adapts the cheap-talk game to investigate the effect of introducing a third-party beneficiary and a third-party victim. That is, in addition to the sender and the receiver in the original game, we introduce another player who does not know the payoff structure and does not make any decisions. This third-party player's payoff can differ across payment options: the third-party can be a victim, a neutral third-party, or a beneficiary of the lie. We show that people's decision about whether to lie depends on the payoff split between the sender and the receiver, as well as the payoff to the third party. Moreover, we find that people show a greater sensitivity to the presence of a third-party beneficiary than to the presence of a third-party victim. Specifically, our results indicate that adding a third-party beneficiary increases one's tendency to lie; introducing a third-party victim, though, does not lower the tendency. When both a beneficiary and victim are introduced, the beneficiary dominates the victim, so the inclination to lie rises. [ABSTRACT FROM AUTHOR]

A potentially biased expert transmits information about a binary state to a decision maker over two periods. The expert is imperfectly informed and is concerned about her reputation for unbiasedness. The decision maker wants his action to match the state in every period, but the true state is never observed. So, he updates his belief about the state by considering both the expert's report and her reputation. The expert now faces two competing incentives - to improve her reputation by disavowing potential bias, and to shift the decision maker's future belief about the state. The game has several novel equilibria. I show that a biased expert may never be disciplined to be honest, while both unbiased and biased experts may lie to signal unbiasedness. A report that disavows a bias is typically seen as conforming to norms, but here it could also arise from reputational incentives to be contrarian. [ABSTRACT FROM AUTHOR]

We study an environment where an informed sender has conflicting interests with an uninformed receiver only in some states. Using an "infection-like" argument, we show that with symmetric loss functions, the presence of such disagreement states - even if they are very rare - leads to coarse communication in all states, even those where, following communication, it is commonly known that the players' interests are perfectly aligned. However, with asymmetric loss functions, one can construct examples with truthful communication in some set of states. [ABSTRACT FROM AUTHOR]

We explore strategic information transmission when there is noise at the observation stage, when an expert observes signals, before he advises a policymaker. That is, the expert might be inexpert. We account for the fact that his signals might be totally uninformative, which is commonly known by players. We find that this inexpertise translates into a greater preference misalignment between players and that this yields a less informative equilibrium. We show that our results follow from the fact that the strategic effect of noise – the welfare change exclusive due to changes in the equilibrium partition – is always negative. Numerical simulations show that noise might be beneficial if the policymaker openly disagrees about noise chances. This makes the point that whether noise is beneficial or not crucially depends on how early in the game it arises, and also whether noise chances are commonly known by players or not. [ABSTRACT FROM AUTHOR]

Retailers may collaborate with key suppliers to manage some specified categories. This collaboration is often formalized as a "captainship arrangement" between the retailer and her leading supplier in the category. The designated "category captain" assists the retailer with category management decisions. We show that captainship arrangements have the potential to generate a valuable information effect for the retailer: nonprice decisions by the category captain can reveal information that allows the retailer to improve profit through better retail pricing decisions. We also show that captainship arrangements have the greatest potential to make the retailer better off in categories where the retailer is highly uncertain about the impact of category resources on brands' demand. Moreover, the more substitutable the brands in the category, the more valuable a captainship arrangement is to the retailer. The information effect of category captainship is robust to a variety of arrangements. It is present under delegation arrangements (where the retailer delegates the task of category resources deployment to the captain), as well as under advisory arrangements (where the retailer retains control over category decisions, relying on the captain for advice). Interestingly, we find that delegation has a "better" potential to transmit information than advisory. Furthermore, in case of an advisory arrangement, the retailer is better off keeping the captain's advice confidential rather than sharing it with the other suppliers. [ABSTRACT FROM AUTHOR]

We experimentally study information transmission by experts motivated by their reputation for being well-informed. In our game of reputational cheap talk, a reporter privately observes information about a state of the world and sends a message to an evaluator; the evaluator uses the message and the realized state of the world to assess the reporter's informativeness. We manipulate the key driver of misreporting incentives: the uncertainty about the phenomenon to forecast. We highlight three findings. First, misreporting information is pervasive even when truthful information transmission can be an equilibrium strategy. Second, consistent with the theory, reporters are more likely to transmit information truthfully when there is more uncertainty on the state. Third, evaluators have difficulty learning reporters' strategies and, contrary to the theory, assessments react more strongly to message accuracy when reporters are more likely to misreport. In a simpler environment with computerized evaluators, reporters learn to best reply to evaluators' behavior and, when the state is highly uncertain and evaluators are credulous, to transmit information truthfully. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Funding: Financial support from the H2020 European Research Council [Grant 295835 (EVALIDEA)] is gratefully acknowledged. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2022.4629. [ABSTRACT FROM AUTHOR]

Information necessary for decision-making is often distributed among agents with misaligned interests. In such settings receiving information is desirable for the agents, while revealing it may be privately harmful. This paper constructs a class of almost-truthful interim-biased mediation protocols that incentivize information exchange in a succinct model capturing such conflicts. The protocols in this class receive signal reports from the agents and send private messages back, almost always transmitting the received signal reports without any distortions. Each rare distorted message is deliberately designed to prevent deviations from truth-telling. Specifically, each mediator's distortion aims at implicitly encouraging a truthful agent to take the action that is interim-optimal given her private signal report only. A deviating agent, however, receives an encouragement based on an untruthful report and thus shifts her action away from the truly interim-optimal one when facing such a distortion. As a result, the deviating agent is put to a disadvantage when the mediator distorts the signals, which is enough to ensure truthful communication when the misalignment of interests between the agents is sufficiently small. [ABSTRACT FROM AUTHOR]

A decision maker (DM) must choose between two projects or decide on no project. The expected benefits of these projects are correlated. The DM seeks advice from an agent with private information about the projects’ benefits. However, the agent’s divergent preferences for projects and lack of consideration for the DM’s implementation costs may introduce two types of biases: project bias, favoring the agent’s project, or pandering bias, favoring the project preferred by the DM. Our findings reveal that project correlation leads to these biases countervailing each other, facilitating the transmission of information. The agent typically recommends a project based on private information to dissuade the DM from choosing no project, as this would be detrimental to the agent. Additionally, we explore optimal delegation within organizations. In contrast to the prevailing literature advocating for delegation to biased agents for enhanced information elicitation, our study suggests limited benefits in the context of project correlation.

We develop a model of cheap talk with transparent and monotone motives from a seller to an informed buyer. By transparent and monotone motives, we mean that the seller’s preference does not depend on the state of the world and is increasing in the choice(s) of the buyer regardless of the state of the world. We first show that if the buyer is completely uninformed, only the babbling equilibrium exists. Then, we obtain our main result that even if the buyer has the slightest information, full revelation can be supported by using the crosschecking strategy of the buyer if and only if the seller has a CARA (constant absolute risk aversion) utility function unless the buyer has too much information. In this equilibrium, the buyer can punish the seller who sends a message far above the buyer’s information by ignoring the seller’s message. Paradoxically, no information and too much information of the buyer both eliminate the fully revealing equilibrium with the crosschecking strategy. We also obtain a counterintuitive result that the seller prefers a more informed buyer than a less informed buyer.

This paper examines the incentives of low-quality sellers to truthfully communicate their product quality in an environment where high-quality sellers cannot fully separate themselves. Private information about the product's quality can be conveyed through cheap-talk messages, and products are sold in one of four auction formats: first-price (FPA), second-price (SPA), all-pay (APA), or sealed-bid double auctions (DA). Our study finds that low-quality sellers can benefit from honestly communicating their quality under certain circumstances, such as in risky auction formats (DA and APA) and when there is a low prior probability of high-quality products. We also observe that low-quality claims can be more profitable, regardless of the competitiveness of the environment. Finally, we demonstrate that sellers' ability to set reservation prices does not improve communication regarding product quality. [ABSTRACT FROM AUTHOR]

Although workers' wage claims are common in the workplace, the literature has failed to statistically examine their impact on the reciprocal relationships between workers and managers. We overcome this issue by conducting laboratory experiments based on a one-shot gift exchange game in the context of firm–worker relationships. Our design accepts two types of voice by workers regarding the contract wage with their firm, both defined as cheap talk. One voice communicates only the desirable wage for the workers, whereas the second voice additionally communicates their future efforts. We find that both types of voice do not increase firms' offers but instead reduce agreement contract rates. Furthermore, they undermine workers' reciprocity regardless of the wage levels offered by the firm, thus reducing the effort levels post-agreement in an incomplete employment contract. Additional experiments revealed that the voice's adverse effects persist even for repeated interactions. However, workers' voices, including future efforts, lead to higher wage offers, which outweigh the adverse effect on workers' reciprocal behaviors; that is, it increases the effort level after the agreements. [ABSTRACT FROM AUTHOR]

In the Crawford–Sobel (uniform, quadratic utility) cheap-talk model, we consider a simple mediation scheme (a communication device) in which the informed agent reports one of the N possible elements of a partition to the mediator and then the mediator suggests one of the N actions to the uninformed decision-maker according to the probability distribution of the device. We show that no such simple mediated equilibrium can improve upon the unmediated N-partition Crawford–Sobel equilibrium when the preference divergence parameter (bias) is small. [ABSTRACT FROM AUTHOR]

This paper develops a two-period game theoretic model to investigate a seller's quality claims in a cheap-talk setting. In this model, consumers are reference-dependent with respect to product quality, and consumers who have purchased items can share their quality assessments via online ratings; additionally, consumers may be naive or experienced: naive consumers simply believe the quality claims and quality assessments, whereas experienced consumers can accordingly make rational quality inferences. We find that, in the scenario with only naive consumers, when the reference effect is weak, the seller will always claim the highest quality; when the reference effect is strong, the low-quality seller will claim the highest quality, whereas the high-quality seller will understate its products' quality. In the scenario with only experienced consumers, the seller will claim some moderate quality levels. In the scenario with both types of consumers, in period one, the low-quality seller will always claim some moderate quality levels to serve both types of consumers, whereas the high-quality seller will claim the highest quality when the reference effect is extremely weak and thus serve only naive consumers, or it will adopt truth-telling otherwise; in period two, the low-quality seller will charge a higher price to serve only experienced consumers, whereas the high-quality seller will charge a lower price to serve both types of consumers. [ABSTRACT FROM AUTHOR]

This paper provides a refinement that uniquely selects the ex-ante Pareto dominant equilibrium in a cheap talk game, provided one exists. The refinement works by embedding any cheap talk game into a class of two-stage games where: in stage 1 sender and receiver can, at a cost, alter their preferences; and in stage 2 the cheap talk game is played. For such games, we show that a forward induction logic can be invoked to select the ex-ante Pareto-dominant equilibrium in the second stage. Cheap talk games with exogenously fixed preferences are then treated as limiting cases of this larger class of games. [ABSTRACT FROM AUTHOR]

We investigate how prior-biased inferences change players' strategic incentives and result in novel welfare implications in the canonical framework of strategic information transmission. The ex ante social welfare achieved in our model exceeds the upper bound characterized in the standard environment without prior bias. The welfare gain stems from the fact that the receiver's prior bias weakens the link between the sender's message and the receiver's response without contaminating the actual content of the messages. We further show that direct communication is optimal among all possible communication protocols in the presence of a sufficient degree of prior bias. [ABSTRACT FROM AUTHOR]

In this paper, we broaden the existing notion of vagueness to account for linguistic ambiguity that results from context-dependent use of language. This broadened notion, termed literal vagueness, necessarily arises in optimal equilibria in many standard conversational situations. In controlled laboratory experiments, we find that, despite the strategic complexity in its usage, people can indeed use literally vague language to effectively transmit information. Based on the theory and the experimental evidence, we conclude that context dependence is an appealing explanation for why language is vague. [ABSTRACT FROM AUTHOR]

We study a real-effort environment, where a delegator has to decide if and to whom to delegate a task. Applicants send cheap-talk messages about their past performance before the delegator decides. We experimentally test the theoretical prediction that information transmission does not occur in equilibrium. In our experiment, we vary the message space available to the applicants and compare the information transmitted as well as the level of efficiency achieved. Depending on the treatment, applicants can either submit a Number indicating past performance, an Interval in which past performance falls, or a free Text message. We observe that messages contain information in all treatments. Interestingly, information transmission occurs only in the treatments where messages are intervals or free text. Social welfare is higher if messages are intervals or free text than precise numbers. Gender and ethnicity stereotypes only influence delegation in the Number treatment, where no information transmission takes place. [ABSTRACT FROM AUTHOR]

We analyze a cheap‐talk model in which an informed sender and an uninformed receiver engage in a finite‐period communication before the receiver chooses a project. During the communication phase, the sender sends a message in each period, and the receiver then voluntarily pays money for the message. As in the canonical cheap‐talk model, all the equilibria are interval partitional; in our setting, however, the set of equilibrium partitions becomes larger. We show that the multistage information transmission with voluntary monetary transfers can improve welfare if the receiver cares more about the decision and the sender cares more about money or if the ex post sender–receiver incentive conflict over the project choice is small. We derive a multistage information elicitation mechanism without commitment that can be more beneficial to the receiver than a broad class of other communication protocols (e.g., mediation and arbitration). [ABSTRACT FROM AUTHOR]

Researchers have often attributed discrete messages such as ratings to a difference in preferences between sender and receiver. By extending a standard model of information transmission, we show that discreteness can also arise when preferences are identical but misinterpretation is possible. Whereas discrete messages are less precise, they are easier to interpret. We provide predictions for the distribution of ratings. If we believe that an observed distribution results from cooperative behavior, the model provides a method for inferring the objectives of the sender and receiver. Ratings inflation and deflation arise as emergent properties of an optimal distribution. This paper was accepted by Gustavo Manso, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.4297. [ABSTRACT FROM AUTHOR]

We explore costly deliberation by two differentially informed and possibly biased jurors: A hawk Lones and a dove Moritz alternately insist on a verdict until one concedes. Debate assumes one of two genres, depending on bias: A juror, say Lones, is intransigent if he wishes to prevail and reach a conviction for any type of Moritz next to concede. In contrast, Lones is ambivalent if he wants the strongest conceding types of Moritz to push for acquittal. Both jurors are ambivalent with small bias or high delay costs. As Lones grows more hawkish, he argues more forcefully for convictions, mitigating wrongful acquittals. If dovish Moritz is intransigent, then he softens (strategic substitutes), leading to more wrongful convictions. Ambivalent debate is new, and yields a novel dynamic benefit of increased polarization. For if Moritz is ambivalent, then he toughens (strategic complements), and so, surprisingly, a more hawkish Lones leads to fewer wrongful acquittals and convictions. So more polarized but balanced debate can improve communication, unlike in static cheap talk. We also show that patient and not too biased jurors vote against their posteriors near the end of the debate, optimally playing devil’s advocate. We shed light on the adversarial legal system, peremptory challenges, and cloture rules.

Threatening propaganda—particularly when extreme and frequent—is often considered "cheap talk." However, this article argues systematic and comprehensive analysis of such threats can still lend valuable insights. In particular, the aggregate content of threats reveals information about the threat perceptions of the messenger, while the frequency of threats provides information about the messenger's resolve. To test this theory, I analyze a comprehensive dataset of North Korean propaganda between 1996 and 2018, showing that North Korea systematically issues threats to its adversaries when they engage in joint military exercises or when they take steps, such as the development of missile defenses, that challenge the survivability or deterrent capability of the North Korean nuclear arsenal. Additionally, North Korea's rhetoric signals its resolve. As the volume of North Korean threats increases, so too does the likelihood that North Korea will engage in military provocations, including nuclear and missile tests. La propaganda amenazante, especialmente cuando es extrema y frecuente, generalmente se considera "discurso barato". Sin embargo, este artículo sostiene que un análisis sistemático e integral de dichas amenazas puede aportar observaciones valiosas. En concreto, el contenido global de las amenazas revela información sobre las percepciones de la amenaza del mensajero, mientras que la frecuencia de las amenazas proporciona información sobre la resolución del mensajero. Para probar esta teoría, analizo un conjunto detallado de datos de propaganda de Corea del Norte de entre 1996 y 2018, que muestra que Corea del Norte envía amenazas sistemáticamenta a sus adversaries cuando participant en ejercicios militares conjuntos o cuando toman medidas que desafían la capacidad de supervivencia o de dissuasion del arsenal nuclear norcoreano, como el desarollo de defensa con misiles. Además, la retórica de Corea del Norte indica resolución. A medida que las amenazas de Corea del Norte aumentan, también lo hacen sus probabilidades de involucrarse en provocaciones militares, como pruebas nucleares y de misiles. La propagande menaçante – particulièrement lorsqu'elle est extrême et fréquente – est souvent considérée comme étant de la « conversation libre ». Cependant, cet article soutient qu'une analyse systématique et exhaustive de telles menaces peut tout de même apporter de précieux renseignements. En particulier, le contenu agrégé des menaces révèle des informations concernant la manière dont le messager perçoit ces menaces, alors que la fréquence des menaces offre des informations sur la détermination du messager. Pour mettre cette théorie à l'épreuve, j'analyse un jeu de données complet portant sur la propagande nord-coréenne entre 1996 et 2018 et je montre que la Corée du Nord émet systématiquement des menaces envers ses adversaires lorsqu'ils s'engagent dans des exercices militaires conjoints ou lorsqu'ils entreprennent des démarches, telles que le développement de défenses antimissiles, qui remettent en cause la capacité de survie ou de dissuasion de l'arsenal nucléaire nord-coréen. De plus, la rhétorique de la Corée du Nord signale sa détermination. Plus le volume des menaces nord-coréennes augmente, plus il en va de même pour la probabilité que la Corée du Nord se livre à des provocations militaires, notamment à des essais nucléaires et de missiles. [ABSTRACT FROM AUTHOR]

Obtaining insights on the illicit consumption of endangered wildlife products is challenging, especially when the study objects are the super-rich. This research note draws upon my experience interviewing nearly 1,000 rhino horn consumers in Vietnam. Trust is crucial in such interactions. No interviews could have been conducted without good rapport between interviewers and respondents. Nonetheless, soliciting interviews requires skills that one cannot expect to teach enumerators in the short term. This includes a winning sense of humour, colourful life experience, and true grit. Once good rapport is established, the use of specialised questionning techniques or bias-mitigation tools becomes unnecessary. Instead I suggest a practical approach to study consumers of illegal and luxury wildlife products in an Asian context. [ABSTRACT FROM AUTHOR]

Uncommitted reference prices can be endogenously credible because buyer search can regulate both high-cost and low-cost sellers' incentives for deceptive communication. Sellers may display unreasonably high prices (in high-cost oriented contexts) that are never accepted or would surely be discounted through bilateral bargaining. Conversely, general or vague prices with incredible appeals may be advertised (in low-cost oriented settings) as a range or for a category but not tied to specific items. Nevertheless, these seemingly irrelevant or unbinding prices can affect buyer behavior and bargaining outcome. This paper presents a new explanation for these puzzling phenomena. We propose that advertised reference prices can be a strategic tool to communicate privately known seller costs to influence optimal buyer strategy to search value information. We show that cheap-talk communication via uncommitted prices can be endogenously credible, because optimal buyer search strategy can be imperfectly aligned with seller preference. In particular, a high-cost seller may prefer the buyer to acquire information in a more cautious manner (i.e., less willing to stop at good news but more eager to quit at bad news) than a low-cost seller, which may coincide with the buyer's optimal search strategy. We demonstrate that endogenous buyer search can serve as a two-way discipline to regulate both high-cost and low-cost sellers' incentives for deception, which thus can sustain credible communication for high-cost and/or low-cost oriented settings. [ABSTRACT FROM AUTHOR]

In the Crawford–Sobel (uniform, quadratic utility) cheap-talk model, we consider a simple mediation scheme (a communication device) in which the informed agent reports one of the N possible elements of a partition to the mediator and then the mediator suggests one of the N actions to the uninformed decision-maker according to the probability distribution of the device. We show that no such simple mediated equilibrium can improve upon the unmediated N-partition Crawford–Sobel equilibrium when the preference divergence parameter (bias) is small.

I experimentally investigate how vague language changes the nature of communication in a biased strategic information transmission game. Counterintuitively, when both precise and imprecise messages can be sent, in aggregate, senders are more accurate, and receivers trust them more than when only precise messages can be sent. I also develop and structurally estimate a model showing that vague messages increase communication between boundedly rational players, especially if some senders are moderately honest. Moderately honest senders avoid stating an outright lie by using vague messages to hedge them. Then, precise messages are more informative because there are fewer precise lies. [ABSTRACT FROM AUTHOR]

Almost 60% of mergers and acquisitions are concluded with the aid of multiple third-party advisors. While there has been work on the impact of advisors, the theoretical and empirical implications of using multiple advisors remain unclear. Using insights from the "cheap talk" literature, we derive hypotheses on the impact of multiple advisors. Expanding upon this, we then consider the moderating impact of advisor reputation/quality and deal timing (in terms of merger wave periods vs. non-merger wave periods), as factors that both the cheap talk and the literature on single advisors highlight as relevant. We test our hypotheses using a sample of 10,544 large US acquisitions, and evaluate the impact of advisors using an event study and abnormal returns. Our results support a value-creating role for single advisors—we find that deals with single advisors create a higher expectation of value-creation—but find little support for the use of multiple advisors. Furthermore, we show that the moderating effect of advisor reputation, and deal timing, are contingent on the number of advisors. In doing so, we make a number of academic and practical contributions to the discussion of advisors in mergers and acquisitions. [ABSTRACT FROM AUTHOR]

We investigate a cheap talk model in which a decision maker and an expert are both privately informed. Both players observe independent signals that jointly determine ideal actions for the players, and the decision maker can send a cheap talk message to the expert, which is followed by the cheap talk of the expert and then the action of the decision maker. In equilibrium, the strategy of the decision maker is not monotonic, and the revelation of the decision maker concerning her information does not necessarily result in welfare improvement of the players. In particular, in models in which optimal actions are additively and/or multiplicatively separable in the information of two players and their preferences are represented by quadratic loss functions, the information revelation of the decision maker cannot facilitate information transmitted from the expert. [ABSTRACT FROM AUTHOR]

A decision maker solicits information from two partially informed experts and then makes a choice under uncertainty. The experts can be either moderately or extremely biased relative to the decision maker, which is their private information. I investigate the incentives of the experts to share their private information with the decision maker and analyze the resulting effects on information transmission. I show that it may be optimal to consult a single expert rather than two experts if the decision maker is sufficiently concerned about taking advice from extremely biased experts. In contrast to what may be expected, this result suggests that getting a second opinion may not always be helpful for decision making. [ABSTRACT FROM AUTHOR]