Cheap Talk with Correlated Signals

27 Pages Posted: 2 Oct 2013

See all articles by A.K.S. Chand

A.K.S. Chand

Indian Statistical Institute, New Delhi

Sergio Currarini

University of Leicester - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia

Giovanni Ursino

Università Cattolica del Sacro Cuore

Date Written: September 30, 2013

Abstract

We consider a game of information transmission, with one informed decision maker gathering information from one or more informed senders. Private information is (conditionally) correlated across players, and communication is cheap talk. For the one sender case, we show that correlation unambiguously tightens the existence conditions for a truth-telling equilibrium. We then generalize the model to an arbitrary number of senders, and we find that, in this case, the effect of correlation on the incentives to report information truthfully is non monotone, and correlation may discipline senders' equilibrium behavior, making it easier to sustain truth-telling.

Keywords: Cheap Talk, Multiple Senders, Correlation

JEL Classification: C72, D82, D83

Suggested Citation

Chand, Arya Kumar Srustidhar and Currarini, Sergio and Ursino, Giovanni, Cheap Talk with Correlated Signals (September 30, 2013). FEEM Working Paper No. 77.2013, CMCC Research Paper No. 0177 , Available at SSRN: https://ssrn.com/abstract=2333576 or http://dx.doi.org/10.2139/ssrn.2333576

Arya Kumar Srustidhar Chand

Indian Statistical Institute, New Delhi ( email )

7 S .J. S.
Sansanwal Marg
New Delhi, 110016
India
+91-11-41493935 (Phone)

Sergio Currarini (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Giovanni Ursino

Università Cattolica del Sacro Cuore ( email )

Largo Gemelli, 1
Milan, MI 20123
Italy

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