Asymmetric Information and Legislative Rules with a Heterogeneous

Multiple Referrals and Multidimensional Cheap Talk

“…With symmetric information, the optimal choice for the policy maker, if the ideal point is the origin, is y ¤ = ¡µ. As in Austen Smith and Riker (1987) and Gilligan and Krehbiel (1989) the policy maker chooses y without knowledge of µ. The experts instead observe the realization of nature.…”

“…The intention here is, more than to present previous work, to extend and unify its results in a general framework. Gilligan and Krehbiel [1989]¯rst analyze a cheap talk model with multiple referrals, heterogeneous preferences and asymmetric information along one dimension. They¯nd an equilibrium of the game that is not fully revealing and draw inferences on it, but they do not prove the non existence of a fully revealing equilibrium.…”

“…Crawford and Sobel [1982] began this literature analyzing the case of one informed agent (sender) and an informed principal (receiver) who makes a decision based on the message of the sender; they prove that no fully revealing equilibrium exists and characterize a particularly important class of equilibria 5 . Only recently, however, the two-sender case has been analyzed in the pioneering works of Gibbons [1988], Gilligan and Krehbiel [1989], Austen Smith [1991]; and the more recent works of Epstein [1997], Krishna and Morgan [1999a] and Krishna and Morgan [1999b]. Although these works di®er in modelling choices and assumptions, they have a common trait in line with the result of Crawford and Sobel [1982]: full revelation of information is not typically achieved even with multiple referrals and the informativeness of the equilibria is positively correlated with the proximity of the ideal points of the experts and the policy maker.…”

“…What really matters for the existence of a fully revealing equilibrium in this case is the local behavior of experts' utilities at the ideal point of the policy maker. If utilities are di®erentiable, the gradient of utilities at the policy maker's ideal point is crucial to existence, a result that has the°avor of the existence results in the social choice literature 13 . The theory presented therefore questions the \outlier principle" as a characterizing feature of legislative signalling models, but provides strong support for the informational theory of legislative organizations.…”

“…Open rule vs. closed rule. The multi-dimensional case yields useful insights into the analysis of the \open rule" vs. \closed rule" question, a classic topic of analysis in the legislative cheap talk games (see Gilligan and Krehbiel 1987, 1989, 1990). In the one-dimensional setting, the meaning of \closed rule" is obvious: having a \closed rule" power in one dimension means that the policy maker is constrained to choose between the proposal and the status quo; there is no question about in which dimension power is granted.…”