Cheap Talk in Complex Environments
April 2, 2024 Yunus Aybas

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Yunus Aybas is a sixth year PhD candidate in the Economics Department at Stanford University. He will be starting as an assistant professor in the Economics Department at Texas A&M University this upcoming fall.



Website: https://aybas.people.stanford.edu/

Paper: https://aybas.people.stanford.edu/sites/g/files/sbiybj26671/files/media/file/aybascallander_cheaptalk_2024.pdf



Abstract: Decision making in practice is often difficult, with many actions to choose from and much that is unknown. Experts play a particularly important role in such complex environments. We study the strategic provision of expert advice in a variation of the classic sender-receiver game in which the environment is complex. We identify an equilibrium that is efficient and sender-optimal. The outcome is exactly what the sender would choose if she held full decision making authority. This contrasts with the simple environment of Crawford and Sobel (1982) in which equilibrium outcomes are inefficient and favor the receiver. The equilibrium we identify satisfies the neologism-proof and announcement-proof refinements, and all equilibria satisfying the latter requirement are outcome equivalent to our equilibrium.




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