A Role for Cheap Talk in Disclosure

44 Pages Posted: 7 Sep 2022 Last revised: 18 Oct 2022

See all articles by Wenhao Wu

Wenhao Wu

ShanghaiTech University - School of Entrepreneurship and Management

Date Written: September 7, 2022

Abstract

This paper studies a one-sender-one-receiver disclosure game with general receiver preferences and message structures. Drawing on techniques from information design, I provide a characterization of the Perfect Bayesian Equilibrium outcomes. I find that any PBE can be interpreted as a combination of cheap talk equilibria in a partitional form. I revisit Milgrom (1981, 2008) and identify conditions for the classic unraveling result. I provide an algorithm to construct a PBE in games with linear disclosure structure. In addition, I apply the theory to examples of labor markets and political campaigns. The theory explains why communication usually involves presentation of evidence and randomization over messages.

Keywords: Communication, Incomplete information, disclosure, cheap talk, Information design

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JEL Classification: C72, D82, D83

Suggested Citation

Wu, Wenhao, A Role for Cheap Talk in Disclosure (September 7, 2022). ShanghaiTech SEM Working Paper No. 2022-005, Available at SSRN: https://ssrn.com/abstract=4212160 or http://dx.doi.org/10.2139/ssrn.4212160

Wenhao Wu (Contact Author)

ShanghaiTech University - School of Entrepreneurship and Management ( email )

393 Middle Huaxia Road, Pudong
Shanghai, 201210
China

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