FEEM working papers "Note di lavoro" series
2013 .077

Cheap Talk with Correlated Signals


Authors: A.K.S. Chand, Sergio Currarini, Giovanni Ursino
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Keywords: Cheap Talk, Multiple Senders, Correlation
JEL n.: C72, D82, D83

Abstract

We consider a game of information transmission, with one informed decision maker gathering information from one or more informed senders. Private information is (conditionally) correlated across players, and communication is cheap talk. For the one sender case, we show that correlation unambiguously tightens the existence conditions for a truth-telling equilibrium. We then generalize the model to an arbitrary number of senders, and we find that, in this case, the effect of correlation on the incentives to report information truthfully is non monotone, and correlation may discipline senders' equilibrium behavior, making it easier to sustain truth-telling.

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Suggested citation: Chand A.K.S., S. Currarini, G. Ursino (2013), 'Cheap Talk with Correlated Signals' Nota di Lavoro 77.2013, Milan, Italy: Fondazione Eni Enrico Mattei.

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