STRATEGIC INFORMATION TRANSMISSION:
Signaling, Cheap Talk and Persuasion
Professor: Frédéric Koessler
∗
Academic Year 2010/2011
Description
This course presents basic models and economic applications of strategic information transmission. The aim is to understand when and how strategic communication can effectively exchange
information and enrich the set of equilibrium outcomes. The first part of the course is dedicated
to “cheap talk games”, in which communication is costless and non binding, and information is
not certifiable. In the second part we study “persuasion games”, in which information becomes
certifiable. Applications include biased expertise, policy announcement, delegation, lobbying
with several audiences, informative advertising, and information sharing in oligopolies.
Ce cours présente des modèles et des applications économiques liées à la transmission stratégique d’information. L’objectif est de comprendre quand et comment la communication stratégique
permet aux joueurs de partager leurs informations et d’enrichir les issues d’équilibres possibles.
Les premières séances du cours sont consacrées aux jeux dits de “cheap talk”, dans lesquels la
communication est gratuite et sans engagement, et où l’information n’est pas certifiable. Dans les
séances suivantes nous étudions les jeux dits de “persuasion”, dans lesquels l’information devient
certifiable. Parmi les applications économiques étudiées, nous verrons des problèmes d’expertise,
d’annonces de politiques économiques, de délégation, de lobbying à plusieurs décideurs, de publicité informative, et de partage d’information dans des situations d’oligopole.
Assessment Method
Homework (exercises) and one referee report (2-5 pages) on a research paper related to the course
(either from the course reading list, or a related paper after my approval). The report should
present a brief summary of the main contributions of the paper and identify its contributions.
It should also discuss alternative ways to approach the problem, deficiencies in the model, or
possible extensions.
General Bibliography
Forges (1994), Farrell and Rabin (1996), Koessler and Forges (2008a,b), Milgrom (2008), Myerson (1994), Sobel (2009).
Slides and handouts of the course can be found here (part 9):
http://sites.google.com/site/frederickoessler/teaching
You can also use Joel Sobel’s reading list here:
http://www.econ.ucsd.edu/ jsobel/201S09/201s09home.htm
∗
URL : http://sites.google.com/site/frederickoessler/
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Organization
Note: A session and some parts will be skipped depending on students’ preference/interest
Session 1. Decentralized Cheap Talk I
• Remainder: Equilibrium refinement and signaling games
• Credible information under cheap talk: Examples
• Geometric characterization of Nash equilibrium payoffs
• Influential cheap talk with state independent preferences
Bibliography: Aumann and Hart (2003), Chakraborty and Harbaugh (2010), Osborne (2004,
chap. 10), Osborne and Rubinstein (1994, chap. 12), Sobel (2007), Spence (1973).
Session 2. Decentralized Cheap Talk II
• Expertise with a biased interested party: The model of Crawford and Sobel (1982)
• Credibility of policy announcements
• Communication in organizations: Delegation vs. cheap talk vs. commitment
• Multiple senders and multidimensional cheap talk
• Lobbying with several audiences
• Some experimental evidence
Bibliography: Battaglini (2002), Crawford and Sobel (1982), Dessein (2002), Farrell and Gibbons
(1989), Melumad and Shibano (1991), Stein (1989).
Session 3. Long and Centralized Cheap Talk
• The Art of Conversation: Multistage communication and compromises
• Mediated communication: Correlated and communication equilibria
Bibliography: Aumann (1974, 1987), Aumann and Hart (2003), Forges (1990), Krishna and
Morgan (2004).
Session 4. Persuasion Games I
• The revelation principle revisited
• Hard evidence and information certification in games
• Geometric characterization of Nash and perfect Bayesian equilibrium payoffs
• Sceptical strategies and worst case inferences in monotonic relationships
Bibliography: Forges and Koessler (2005), Forges and Koessler (2008), Green and Laffont (1986),
Grossman (1981), Milgrom (1981), Milgrom and Roberts (1986).
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Session 5. Persuasion Games II: Extensions and Applications
• Persuasion with type-dependent biases
• Informative advertising
• Strategic information revelation in oligopolies
Bibliography: Kamenica and Gentzkow (2009), Okuno-Fujiwara, Postlewaite, and Suzumura
(1990), Seidmann and Winter (1997), Van Zandt and Vives (2007), Anderson and Renault
(2006), Koessler and Renault (2010).
References
Anderson, S. and R. Renault (2006): “Advertising Content,” American Economic Review,
96, 93–113.
Aumann, R. J. (1974): “Subjectivity and Correlation in Randomized Strategies,” Journal of
Mathematical Economics, 1, 67–96.
——— (1987): “Correlated Equilibrium as an Expression of Bayesian Rationality,” Econometrica, 55, 1–18.
Aumann, R. J. and S. Hart (2003): “Long Cheap Talk,” Econometrica, 71, 1619–1660.
Battaglini, M. (2002): “Multiple Referrals and Multidimensional Cheap Talk,” Econometrica,
70, 1379–1401.
Chakraborty, A. and R. Harbaugh (2010): “Persuasion by Cheap Talk,” American Economic Review, forthcoming.
Crawford, V. P. and J. Sobel (1982): “Strategic Information Transmission,” Econometrica,
50, 1431–1451.
Dessein, W. (2002): “Authority and Communication in Organizations,” Review of Economic
Studies, 69, 811–832.
Farrell, J. and R. Gibbons (1989): “Cheap Talk with Two Audiences,” American Economic
Review, 79, 1214–1223.
Farrell, J. and M. Rabin (1996): “Cheap Talk,” Journal of Economic Perspectives, 10,
103–118.
Forges, F. (1990): “Equilibria with Communication in a Job Market Example,” Quarterly
Journal of Economics, 105, 375–398.
——— (1994): “Non-Zero Sum Repeated Games and Information Transmission,” in Essays in
Game Theory: In Honor of Michael Maschler, ed. by N. Megiddo, Springer-Verlag.
Forges, F. and F. Koessler (2005): “Communication Equilibria with Partially Verifiable
Types,” Journal of Mathematical Economics, 41, 793–811.
——— (2008): “Long Persuasion Games,” Journal of Economic Theory, 143, 1–35.
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Green, J. R. and J.-J. Laffont (1986): “Partially Verifiable Information and Mechanism
Design,” Review of Economic Studies, 53, 447–456.
Grossman, S. J. (1981): “The Informational Role of Warranties and Private Disclosure about
Product Quality,” Journal of Law and Economics, 24, 461–483.
Kamenica, E. and M. Gentzkow (2009): “Bayesian persuasion,” NBER Working Paper.
Koessler, F. and F. Forges (2008a): “Multistage Communication with and without Verifiable Types,” International Game Theory Review, 10, 145–164.
——— (2008b): “Transmission stratégique de l’information et certification,” Annales
d’Économie et Statistiques, 89, 3–61.
Koessler, F. and R. Renault (2010): “When does strategic information disclosure lead to
perfect consumer information?” mimeo.
Krishna, V. and J. Morgan (2004): “The Art of Conversation: Eliciting Information from
Experts through Multi-Stage Communication,” Journal of Economic Theory, 117, 147–179.
Melumad, N. D. and T. Shibano (1991): “Communication in Settings with no Transfers,”
Rand Journal of Economics, 22, 173–198.
Milgrom, P. (1981): “Good News and Bad News: Representation Theorems and Applications,”
Bell Journal of Economics, 12, 380–391.
——— (2008): “What the seller won’t tell you: persuasion and disclosure in markets,” Journal
of Economic Perspectives, 22, 115–131.
Milgrom, P. and J. Roberts (1986): “Relying on the Information of Interested Parties,”
Rand Journal of Economics, 17, 18–32.
Myerson, R. B. (1994): “Communication, Correlated Equilibria and Incentive Compatibility,”
in Handbook of Game Theory, ed. by R. J. Aumann and S. Hart, Elsevier Science B. V., vol. 2,
chap. 24, 827–847.
Okuno-Fujiwara, A., M. Postlewaite, and K. Suzumura (1990): “Strategic Information
Revelation,” Review of Economic Studies, 57, 25–47.
Osborne, M. J. (2004): An Introduction to Game Theory, New York, Oxford: Oxford University Press.
Osborne, M. J. and A. Rubinstein (1994): A Course in Game Theory, Cambridge, Massachusetts: MIT Press.
Seidmann, D. J. and E. Winter (1997): “Strategic Information Transmission with Verifiable
Messages,” Econometrica, 65, 163–169.
Sobel, J. (2007): “Signaling Without Handicap,” mimeo.
——— (2009): “Signaling Games,” in Encyclopedia of Complexity and System Science, ed. by
M. Sotomayor, Springer.
Spence, A. M. (1973): “Job Market Signaling,” Quarterly Journal of Economics, 87, 355–374.
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Stein, J. C. (1989): “Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements,”
American Economic Review, 79, 32–42.
Van Zandt, T. and X. Vives (2007): “Monotone Equilibria in Bayesian Games of Strategic
Complementarities,” Journal of Economic Theory, 134, 339–360.
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