American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Persuasion by Cheap Talk
American Economic Review
vol. 100,
no. 5, December 2010
(pp. 2361–82)
Abstract
We consider the credibility, persuasiveness, and informativeness of multidimensional cheap talk by an expert to a decision maker. We find that an expert with state-independent preferences can always make credible comparative statements that trade off the expert's incentive to exaggerate on each dimension. Such communication benefits the expert—cheap talk is "persuasive"—if her preferences are quasiconvex. Communication benefits a decision maker by allowing for a more informed decision, but strategic interactions between multiple decision makers can reverse this gain. We apply these results to topics including product recommendations, voting, auction disclosure, and advertising. (JEL D44, D72, D82, D83, M37)Citation
Chakraborty, Archishman, and Rick Harbaugh. 2010. "Persuasion by Cheap Talk." American Economic Review, 100 (5): 2361–82. DOI: 10.1257/aer.100.5.2361Additional Materials
JEL Classification
- D44 Auctions
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D82 Asymmetric and Private Information
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- M37 Advertising