Endogenous ambiguity in cheap talk
Endogenous ambiguity in cheap talk
This paper proposes a model of ambiguous language. We consider a cheap talk game in which a (possibly ambiguity averse) sender who faces an ambiguity averse receiver is able to randomize according to unknown probabilities. We sho that under fairly general conditions, for any standard influential communication equilibrium there exists a Pareto-dominant equilibrium featruing an ambiguous (i.e. Ellsbergian) communication strategy. Ambiguity, by triggering worst-case decision-making by the receiver, shifts the latter's response to information towards the sender's ideal action, thus encouraging finer information transmission.
University of Southampton
Kellner, Christian
4e2ed069-76c7-4084-a353-f56ee03e2094
Le Quement, Mark T.
db3377aa-f132-410d-bde1-bcaa8c5d1f72
2017
Kellner, Christian
4e2ed069-76c7-4084-a353-f56ee03e2094
Le Quement, Mark T.
db3377aa-f132-410d-bde1-bcaa8c5d1f72
Kellner, Christian and Le Quement, Mark T.
(2017)
Endogenous ambiguity in cheap talk
(Discussion Papers in Economics and Econometrics, 1701)
University of Southampton
46pp.
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Monograph
(Discussion Paper)
Abstract
This paper proposes a model of ambiguous language. We consider a cheap talk game in which a (possibly ambiguity averse) sender who faces an ambiguity averse receiver is able to randomize according to unknown probabilities. We sho that under fairly general conditions, for any standard influential communication equilibrium there exists a Pareto-dominant equilibrium featruing an ambiguous (i.e. Ellsbergian) communication strategy. Ambiguity, by triggering worst-case decision-making by the receiver, shifts the latter's response to information towards the sender's ideal action, thus encouraging finer information transmission.
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Published date: 2017
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Local EPrints ID: 412379
URI: http://eprints.soton.ac.uk/id/eprint/412379
PURE UUID: 91e1916b-d25b-431f-82a4-40a3f962232e
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Date deposited: 17 Jul 2017 13:34
Last modified: 16 Mar 2024 04:24
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Author:
Mark T. Le Quement
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