Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/18652.html
   My bibliography  Save this paper

Accountability and Cheap Talk

Author

Listed:
  • Di Maggio, Marco
Abstract
This paper analyzes a cheap talk model with heterogeneous receivers who are accountable for the correctness of their actions, showing that there exists a truth-revealing equilibrium. This sheds new light on the important role played by elections in shaping politicians' and, more surprisingly, advisor's behaviors in a cheap-talk setting. In deciding which message to send, the advisor is aware that he could use this message to affect the electoral outcome, the manipulation effect, or to shape the first period policy, the influence effect. When the first effect dominates the second there exists an informative equilibrium. In addition, I show that the presence of heterogeneous politicians leads to an increase in voters' welfare as a result of better-informed decisions. I allow the politician to delegate authority to the expert, showing that due to the signaling value of the politician's delegation decision, only corrupt or incompetent incumbents will delegate the second-period decision. Finally, I generalize the results in a number of different directions.

Suggested Citation

  • Di Maggio, Marco, 2009. "Accountability and Cheap Talk," MPRA Paper 18652, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:18652
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/18652/1/MPRA_paper_18652.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap talk can matter in bargaining," Journal of Economic Theory, Elsevier, vol. 48(1), pages 221-237, June.
    2. Sandeep Baliga & Tomas Sjöström, 2004. "Arms Races and Negotiations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 351-369.
    3. Andrea Prat, 2005. "The Wrong Kind of Transparency," American Economic Review, American Economic Association, vol. 95(3), pages 862-877, June.
    4. Marco Battaglini, 2002. "Multiple Referrals and Multidimensional Cheap Talk," Econometrica, Econometric Society, vol. 70(4), pages 1379-1401, July.
    5. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part I: A Single Policy Task," American Economic Review, American Economic Association, vol. 97(1), pages 169-179, March.
    6. Giuseppe Moscarini, 2007. "Competence Implies Credibility," American Economic Review, American Economic Association, vol. 97(1), pages 37-63, March.
    7. Morgan, John & Stocken, Phillip C, 2003. "An Analysis of Stock Recommendations," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 183-203, Spring.
    8. Gromb, Denis & Martimort, David, 2004. "The Organization of Delegated Expertise," IDEI Working Papers 284, Institut d'Économie Industrielle (IDEI), Toulouse.
    9. Antoni Calvo-Armengol & Joan de Marti Beltran, 2009. "Information Gathering in Organizations: Equilibrium, Welfare, and Optimal Network Structure," Journal of the European Economic Association, MIT Press, vol. 7(1), pages 116-161, March.
    10. Philippe Aghion & Mathias Dewatripont & Patrick Rey, 2004. "Transferable Control," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 115-138, March.
    11. Vincent P. Crawford, 2003. "Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions," American Economic Review, American Economic Association, vol. 93(1), pages 133-149, March.
    12. Heikki Rantakari, 2008. "Governing Adaptation -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(4), pages 1257-1285.
    13. , & , J. & ,, 2007. "Noisy talk," Theoretical Economics, Econometric Society, vol. 2(4), December.
    14. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
    15. Roland Benabou & Guy Laroque, 1992. "Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 921-958.
    16. Navin Kartik, 2009. "Strategic Communication with Lying Costs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(4), pages 1359-1395.
    17. Peter Sorensen & Marco Ottaviani, 2000. "Herd Behavior and Investment: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 695-704, June.
    18. Andreas Blume & Oliver Board, 2009. "Intentional Vagueness," Working Paper 381, Department of Economics, University of Pittsburgh, revised May 2009.
    19. Chakraborty, Archishman & Harbaugh, Rick, 2007. "Comparative cheap talk," Journal of Economic Theory, Elsevier, vol. 132(1), pages 70-94, January.
      • Archishman Chakraborty & Rick Harbaugh, 2004. "Comparative Cheap Talk," Working Papers 2004-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    20. Phillip C. Stocken, 2000. "Credibility of Voluntary Disclosure," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 359-374, Summer.
    21. Cukierman, Alex & Tommasi, Mariano, 1998. "When Does It Take a Nixon to Go to China?," American Economic Review, American Economic Association, vol. 88(1), pages 180-197, March.
    22. Vijay Krishna & John Morgan, 2001. "A Model of Expertise," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 747-775.
    23. Valley, Kathleen & Thompson, Leigh & Gibbons, Robert & Bazerman, Max H., 2002. "How Communication Improves Efficiency in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 38(1), pages 127-155, January.
    24. Sandeep Baliga & Tomas Sjöström, 2008. "Strategic Ambiguity and Arms Proliferation," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1023-1057, December.
    25. Robert Dur & Otto H. Swank, 2005. "Producing and Manipulating Information," Economic Journal, Royal Economic Society, vol. 115(500), pages 185-199, January.
    26. Bennedsen, Morten & Feldmann, Sven E., 2006. "Informational lobbying and political contributions," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 631-656, May.
    27. Erik Durbin & Ganesh Iyer, 2009. "Corruptible Advice," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 220-242, August.
    28. Sumon Majumdar & Sharun W. Mukand, 2004. "Policy Gambles," American Economic Review, American Economic Association, vol. 94(4), pages 1207-1222, September.
    29. , & ,, 2008. "Multi-sender cheap talk with restricted state spaces," Theoretical Economics, Econometric Society, vol. 3(1), March.
    30. Joel Sobel, 1985. "A Theory of Credibility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(4), pages 557-573.
    31. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-479, June.
    32. Levy, Gilat, 2004. "Anti-herding and strategic consultation," European Economic Review, Elsevier, vol. 48(3), pages 503-525, June.
    33. Marco Ottaviani & Peter Norman Sorensen, 2006. "Reputational Cheap Talk," RAND Journal of Economics, The RAND Corporation, vol. 37(1), pages 155-175, Spring.
    34. Marco Ottaviani & Peter Norman Sørensen, 2006. "Reputational cheap talk," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 155-175, March.
    35. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    36. Stein, Jeremy C, 1989. "Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements," American Economic Review, American Economic Association, vol. 79(1), pages 32-42, March.
    37. Levy, Gilat & Razin, Ronny, 2004. "Multidimensional Cheap Talk," CEPR Discussion Papers 4393, C.E.P.R. Discussion Papers.
    38. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
    39. Navin Kartik & R. Preston McAfee, 2007. "Signaling Character in Electoral Competition," American Economic Review, American Economic Association, vol. 97(3), pages 852-870, June.
    40. Olszewski, Wojciech, 2004. "Informal communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 180-200, August.
    41. Philippe Aghion & Mathias Dewatripont & Patrick Rey, 2004. "Transferable Control," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 115-138, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Golosov, Mikhail & Skreta, Vasiliki & Tsyvinski, Aleh & Wilson, Andrea, 2014. "Dynamic strategic information transmission," Journal of Economic Theory, Elsevier, vol. 151(C), pages 304-341.
    2. Liu, Yaozhou Franklin & Sanyal, Amal, 2012. "When second opinions hurt: A model of expert advice under career concerns," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 1-16.
    3. Irene Valsecchi, 2013. "The expert problem: a survey," Economics of Governance, Springer, vol. 14(4), pages 303-331, November.
    4. Archishman Chakraborty & Rick Harbaugh, 2010. "Persuasion by Cheap Talk," American Economic Review, American Economic Association, vol. 100(5), pages 2361-2382, December.
      • Archishman Chakraborty & Rick Harbaugh, 2006. "Persuasion by Cheap Talk," Working Papers 2006-10, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy, revised Oct 2009.
    5. Atakan, Alp & Koçkesen, Levent & Kubilay, Elif, 2020. "Starting small to communicate," Games and Economic Behavior, Elsevier, vol. 121(C), pages 265-296.
    6. Lai, Ernest K., 2014. "Expert advice for amateurs," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 1-16.
    7. Venkatesh, Raghul S, 2017. "Cheap Talk with Strategic Substitutability," CRETA Online Discussion Paper Series 31, Centre for Research in Economic Theory and its Applications CRETA.
    8. Sylvain Bourjade & Bruno Jullien, 2011. "The roles of reputation and transparency on the behavior of biased experts," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 575-594, September.
    9. Pavesi, Filippo & Scotti, Massimo, 2022. "Good lies," European Economic Review, Elsevier, vol. 141(C).
      • Filippo Pavesi & Massimo Scotti, 2019. "Good Lies," Working Paper Series 39, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    10. Mariano, Beatriz, 2012. "Market power and reputational concerns in the ratings industry," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1616-1626.
    11. Deimen, Inga & Szalay, Dezsö, 2014. "A Smooth, strategic communication," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 479, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    12. Chakraborty, Archishman & Harbaugh, Rick, 2007. "Comparative cheap talk," Journal of Economic Theory, Elsevier, vol. 132(1), pages 70-94, January.
      • Archishman Chakraborty & Rick Harbaugh, 2004. "Comparative Cheap Talk," Working Papers 2004-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    13. Wonsuk Chung & Rick Harbaugh, 2012. "Biased Recommendations," Working Papers 2012-02, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    14. Archishman Chakraborty & Rick Harbaugh, 2014. "Persuasive Puffery," Marketing Science, INFORMS, vol. 33(3), pages 382-400, May.
      • Archishman Chakraborty & Rick Harbaugh, 2012. "Persuasive Puffery," Working Papers 2012-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    15. Miriam Schütte & Philipp Christoph Wichardt, 2013. "Delegation and Interim Performance Evaluation," CESifo Working Paper Series 4193, CESifo.
    16. Nica, Melania, 2023. "Reputation formation and reinforcement of biases in a post-truth world," Journal of Economic Behavior & Organization, Elsevier, vol. 215(C), pages 455-478.
    17. Miriam Schütte & Philipp C. Wichardt, 2012. "Delegation in Long-Term Relationships," SOEPpapers on Multidisciplinary Panel Data Research 480, DIW Berlin, The German Socio-Economic Panel (SOEP).
    18. Ralph Boleslavsky & Tracy R. Lewis, 2011. "Advocacy and Dynamic Delegation," Working Papers 2011-7, University of Miami, Department of Economics.
    19. Wonsuk Chung & Rick Harbaugh, 2019. "Biased recommendations from biased and unbiased experts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 520-540, June.
    20. Jung, Hanjoon Michael, 2007. "Strategic Information Transmission through the Media," MPRA Paper 5556, University Library of Munich, Germany, revised Oct 2007.

    More about this item

    Keywords

    cheap talk; corruption; reputation; ideology.;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:18652. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.