Strategic Information Transmission

Strategic Information Transmission

1982 | Vincent P. Crawford and Joel Sobel
This paper develops a model of strategic communication where a Sender (S) with better information sends a noisy signal to a Receiver (R), who then acts based on the signal. The authors characterize the set of Bayesian Nash equilibria under standard assumptions and show that equilibrium signaling often takes a simple form, where S partitions the support of their private information and reports only the element of the partition they observe. They find that the equilibrium with the most partitions is Pareto-superior to others and that when agents' preferences are more similar, the equilibrium signal is more informative. The paper also discusses the implications of these findings for bargaining models and other strategic communication scenarios.This paper develops a model of strategic communication where a Sender (S) with better information sends a noisy signal to a Receiver (R), who then acts based on the signal. The authors characterize the set of Bayesian Nash equilibria under standard assumptions and show that equilibrium signaling often takes a simple form, where S partitions the support of their private information and reports only the element of the partition they observe. They find that the equilibrium with the most partitions is Pareto-superior to others and that when agents' preferences are more similar, the equilibrium signal is more informative. The paper also discusses the implications of these findings for bargaining models and other strategic communication scenarios.
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