Cheap Talk with Coarse Understanding

Category: Applied Microeconomics and Organization Seminar
When: 12 Februar 2020
, 17:15
 - 18:30
Where: RuW 4.201

Title: 'Cheap Talk with Coarse Understanding', written with Frédéric Koessler (Paris School of Economics).



We use the analogy-based expectation equilibrium (Jehiel 2005) to study cheap talk from a sender who does not perfectly understand all the messages available to him. The sender is endowed with a privately known language competence corresponding to the set of messages he understands. For the messages he does not understand, the sender has correct but only coarse expectations about the equilibrium response of the receiver. An analogy-based expectation equilibrium is always a Bayesian solution and usually differs from an equilibrium with language barriers (Blume and Board 2013). Partial language competence rationalizes information transmission and lies in pure persuasion problems, and can facilitate information transmission from a moderately biased sender.