Econometrica: Jul 2020, Volume 88, Issue 4

Cheap Talk with Transparent Motives
p. 1631-1660

Elliot Lipnowski, Doron Ravid

We study a model of cheap talk with one substantive assumption: The sender's preferences are state independent. Our main observation is that such a sender gains credibility by degrading self‐serving information. Using this observation, we examine the sender's benefits from communication, assess the value of commitment, and explicitly solve for sender‐optimal equilibria in three examples. A key result is a geometric characterization of the value of cheap talk, described by the quasiconcave envelope of the sender's value function.

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Supplement to "Cheap Talk with Transparent Motives"

In this online appendix, we elaborate on the results mentioned in section 6 and discuss some additional relevant results.

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