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Endogenous ambiguity in cheap talk

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Abstract

This paper proposes a model of ambiguous language. We consider a simple cheap talk game in which a sender who faces an ambiguity averse receiver is able to perform ambiguous randomization, i.e. to randomize according to unknown probabilities. We show that for any standard influential communication equilibrium there exists an equilibrium featuring an ambiguous communication strategy which Pareto-dominates it in terms of consistent planning ex ante utilities. Ambiguity, by triggering worst-case decision-making by the receiver, shifts the latter's response to information towards the sender's ideal action, thus encouraging more information transmission.

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Original languageEnglish
Pages (from-to)1-17
JournalJournal of Economic Theory
Volume173
Early online date24 Oct 2017
DOIs
Publication statusPublished - Jan 2018
Peer-reviewedYes

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  • cheap talk, Ambiguity

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