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American Economic Review: Vol. 100 No. 5 (December 2010)

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Persuasion by Cheap Talk

Article Citation

Chakraborty, Archishman, and Rick Harbaugh. 2010. "Persuasion by Cheap Talk." American Economic Review, 100(5): 2361-82.

DOI: 10.1257/aer.100.5.2361

Abstract

We consider the credibility, persuasiveness, and informativeness of multidimensional cheap talk by an expert to a decision maker. We find that an expert with state-independent preferences can always make credible comparative statements that trade off the expert's incentive to exaggerate on each dimension. Such communication benefits the expert—cheap talk is "persuasive"—if her preferences are quasiconvex. Communication benefits a decision maker by allowing for a more informed decision, but strategic interactions between multiple decision makers can reverse this gain. We apply these results to topics including product recommendations, voting, auction disclosure, and advertising. (JEL D44, D72, D82, D83, M37)

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Online Appendix (66.54 KB)

Authors

Chakraborty, Archishman (York U)
Harbaugh, Rick (IN U)

JEL Classifications

D44: Auctions
D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
D82: Asymmetric and Private Information
D83: Search; Learning; Information and Knowledge; Communication; Belief
M37: Advertising


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