Comparative Cheap Talk

Chakraborty, Archishman; Harbaugh, Rick

doi:10.2139/ssrn.535763

Cited by 30 publications

(31 citation statements)

References 30 publications

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“…Indeed, when disclosing

{η_{i}}_{i \in [0, 1]}

, the regulator communicates relative performance, whereas individual banks can only communicate absolute performance. Chakraborty and Harbaugh (, ) show that an expert with information on multiple variables may be able to credibly communicate a ranking of these variables in cases in which communication about a single variable is impossible. Intuitively, comparative statements have the property of being simultaneously positive along one dimension and negative along another dimension.…”

Section: The Modelmentioning

confidence: 99%

Transparency in the Financial System: Rollover Risk and Crises

Bouvard

Chaigneau

Motta

2015

The Journal of Finance

158

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We present a theory of optimal transparency when banks are exposed to rollover risk. Disclosing bank-specific information enhances the stability of the financial system during crises, but has a destabilizing effect in normal economic times. Thus, the regulator optimally increases transparency during crises. Under this policy, however, information disclosure signals a deterioration of economic fundamentals, which gives the regulator ex post incentives to withhold information. This commitment problem precludes a disclosure policy that provides ex ante optimal insurance against aggregate shocks, and can result in excess opacity that increases the likelihood of a systemic crisis.

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“…Indeed, when disclosing

{η_{i}}_{i \in [0, 1]}

Section: The Modelmentioning

confidence: 99%

Transparency in the Financial System: Rollover Risk and Crises

Bouvard

Chaigneau

Motta

2015

The Journal of Finance

158

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“…Our paper contributes to the large literature on strategic information transmission and communication that starts with Crawford and Sobel () and Holmström (), and more specifically to transmission of multidimensional information (see Sobel () for an extensive review of the literature on strategic communication). In the cheap‐talk framework where no information is verifiable, Chakraborty and Harbaugh () showed that some information, in particular, relative statements about the dimensions of interest, may be transmitted. Chakraborty and Harbaugh () further showed that in the linear case, even when the sender's preferences are independent of his type, information on all but one dimension (the “dimensions of agreement”) may be transmitted.…”

Section: Introductionmentioning

confidence: 99%

Strategic Communication With Minimal Verification

Carroll¹,

Egorov

2019

ECTA

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A receiver wants to learn multidimensional information from a sender, and she has the capacity to verify just one dimension. The sender's payoff depends on the belief he induces, via an exogenously given monotone function. We show that by using a randomized verification strategy, the receiver can learn the sender's information fully in many cases. We characterize exactly when it is possible to do so. In particular, when the exogenous payoff function is submodular, we can explicitly describe a full‐learning mechanism; when it is (strictly) supermodular, full learning is not possible. In leading cases where full learning is possible, it can be attained using an indirect mechanism in which the sender chooses the probability of verifying each dimension.

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“…In a model with two senders, Battaglini () shows that as long as the two senders' ideal points are linearly independent, full information revelation is possible by carefully choosing dimensions to exploit the conflict between senders. In a one‐sender model, Charkraborty and Harbaugh () show that the sender can credibly convey his ranking of different issues to the receiver. In our model, rotations address a very different conflict, i.e., conflict between simple majority voting and efficiency.…”

Section: Introductionmentioning

confidence: 99%

Voting on multiple issues: What to put on the ballot?

Gershkov

Moldovanu

Shi

2019

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We study a multidimensional collective decision under incomplete information. Agents have Euclidean preferences and vote by simple majority on each issue (dimension), yielding the coordinate-wise median. Judicious rotations of the orthogonal axes-the issues that are voted upon-lead to welfare improvements. If the agents' types are drawn from a distribution with independent marginals, then under weak conditions, voting on the original issues is not optimal. If the marginals are identical (but not necessarily independent), then voting first on the total sum and next on the differences is often welfare superior to voting on the original issues. We also provide various lower bounds on incentive efficiency: in particular, if agents' types are drawn from a log-concave density with independently and identically distributed marginals, a second-best voting mechanism attains at least 88% of the first-best efficiency. Finally, we generalize our method and some of our insights to preferences derived from distance functions based on inner products.

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Comparative Cheap Talk

Cited by 30 publications

References 30 publications

Transparency in the Financial System: Rollover Risk and Crises

Transparency in the Financial System: Rollover Risk and Crises

Strategic Communication With Minimal Verification

Voting on multiple issues: What to put on the ballot?

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