UCL Department of Economics


Theory/Experimental Seminar - Steven Callander (Stanford)

21 March 2023, 4:30 pm–6:00 pm


Efficient Cheap Talk in Complex Environments

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Duarte Goncalves

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 the classic sender-receiver game when the environment is complex. We identify an efficient cheap talk equilibrium that is sender-optimal. In fact, the equilibrium action is exactly what the sender would choose were she to hold full decision making power. This contrasts with the inefficient equilibria of the canonical model of Crawford and Sobel (1982) in which the decision making environment is simpler. Thus, strategic communication is not only more favorable to the expert when the environment is complex, it can also be more effective.

Location: 118 Chandler House or Zoom

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