Abstract
A decision-maker relies on information of parties affected by her decision. These parties try to influence her decision by selective disclosure of facts. As is well known from the literature, competition between the informed parties constrains their ability to manipulate information. We depart from this literature by introducing a cost to communicate. Our parties trade off their reporting cost against the effect on the decision. Typically, they never reveal all information. A better outcome may be implemented if the decision-maker adopts an active stance by barring one party from reporting or through cheap talk allowing coordination on a particular equilibrium.
Highlights
Decision-makers must frequently rely on the information of parties who are affected by their decisions
The unraveling argument is well known to fail, if the sender may have no hard information (Dye 1985, Shavell 1989, and Shin 1994a). In this case competition between multiple senders is useful (Shin 1994b, 1998). Within this framework of zero reporting costs and the possibility of no hard information, Bhattacharya and Mukherjee (2013) show that all facts are disclosed with positive probability and that the decision-maker gains nothing from the ability to commit to a default decision in case of no report.[5]
Disclosure typically yields “partial unraveling;” see Jovanovic (1982), Verrechia (1983), Shavell (1989), or Cheong and Kim (2004). We extend these results to a persuasion game with two opposed senders
Summary
Decision-makers must frequently rely on the information of parties who are affected by their decisions. In this case competition between multiple senders is useful (Shin 1994b, 1998) Within this framework of zero reporting costs and the possibility of no hard information, Bhattacharya and Mukherjee (2013) show that all facts are disclosed with positive probability and that the decision-maker gains nothing from the ability to commit to a default decision in case of no report.[5] If cominterrogation and it is the judge who acts to obtain the assistance of an expert when required,” Jolowicz By committing to an extreme decision in case of no report or by barring one party from the persuasion game, the adjudicator shifts the burden of proof solely on one party This moves the no-disclosure set to more extreme states which are ex ante unlikely and, matter less for appropriate decision-making.
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