Credulity, Lies, and Costly Talk

30 Pages Posted: 31 May 2006

See all articles by Navin Kartik

Navin Kartik

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Marco Ottaviani

Bocconi University - Department of Economics

Francesco Squintani

University College London

Abstract

This paper studies a model of strategic communication by an informed and upwardly biased sender to one or more receivers. Applications include situations in which (i) it is costly for the sender to misrepresent information, due to legal, technological, or moral constraints, or (ii) receivers may be credulous and blindly believe the sender's recommendation. In contrast to the predictions obtained in Crawford and Sobel's (1982) benchmark cheap talk model, our model admits a fully separating equilibrium, provided that the state space is unbounded above. The language used in equilibrium is inflated and naive receivers are deceived.

Keywords: Signaling, Cheap talk, Misreporting costs, Lying, Inflated communication, Full revelation

JEL Classification: C72, D82, D83

Suggested Citation

Kartik, Navin and Ottaviani, Marco and Squintani, Francesco, Credulity, Lies, and Costly Talk. Journal of Economic Theory, Forthcoming, Available at SSRN: https://ssrn.com/abstract=905140

Navin Kartik

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

HOME PAGE: http://www.Columbia.edu/~nk2339

Marco Ottaviani (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Francesco Squintani

University College London ( email )

Gower Street
London
United Kingdom

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