Cheap Talk with Correlated Information
34 Pages Posted: 1 Jul 2016
Date Written: June 27, 2016
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: Suggested Citation