Cheap Talk with Correlated Information

34 Pages Posted: 1 Jul 2016

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: June 27, 2016

Abstract

We consider a situation where a decision maker gathers information from two or more imperfectly informed experts. Private information is (conditionally) correlated across players, and communication is cheap talk. We show that with two experts correlation unambiguously tightens the conditions on preferences for a truth-telling equilibrium. However, with multiple experts the effect of correlation on the incentives to report information truthfully is non-monotonic. In particular, while very small and very large correlation levels are detrimental for truth-telling, intermediate levels of correlation may discipline experts' equilibrium behavior, making it easier to sustain truth-telling.

Keywords: Cheap Talk, Multiple Players, Correlation across Signals

JEL Classification: C72, D82, D83

Suggested Citation

Chand, Arya Kumar Srustidhar and Currarini, Sergio and Ursino, Giovanni, Cheap Talk with Correlated Information (June 27, 2016). Available at SSRN: https://ssrn.com/abstract=2802314 or http://dx.doi.org/10.2139/ssrn.2802314

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

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 (Contact Author)

Università Cattolica del Sacro Cuore ( email )

Largo Gemelli, 1
Milan, MI 20123
Italy

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