Communication Games with Optional Verification

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Working paper
Simon Schopohl
Issue number: 
CES Documents de travail
Centre d'Economie de la Sorbonne
We consider a Sender-Receiver game in which the Sender can choose between sending a cheap-talk message, which is costless, but also not verified and a costly verified message. While the Sender knows the true state of the world, the Receiver does not have this information, but has to choose an action depending on the message he receives. The action then yields to some utility for Sender and Receiver. We only make a few assumptions about the utility functions of both players, so situations may arise where the Sender's preferences are such that she sends a message trying to convince the Receiver about a certain state of the world, which is not the true one. In a finite setting we state conditons for full revelation, i.e. when the Receiver always learns the truth. Furthermore we describe the player's behavior if only partial revelation is possible. For a continuous setting we show that additional conditions have to hold and that these do not hold for “smooth” preferences and utility, e.g. in the classic example of quadratic loss utilities.
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