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Communication with partially verifiable endogenous information

22 gennaio 2020 ore 12:00 - 14:00

Aula 207, Sede di Viale Romania, 32

Speaker: Matteo Escudé, European University Institute

Abstract: 

"An expert can covertly acquire information about the state of the world before communicatingwith a decision maker in order to influence her action. The expert’s informationacquisition is unrestricted and costless but her ability to prove to the decision maker what sheprivately learnt is limited. I study how the verifiability of the expert’s acquired informationaffects equilibrium information acquisition and transmission. Even when acquired informationis only partially verifiable, I prove an unravelling result: all equilibria in which theexpert influences the decision maker involve full revelation of the expert’s private information.I then study optimal verifiability environments, giving necessary and sufficient conditionsfor optimality for each of the two agents. Expert-optimal environments are credibly rich inthe sense that, even when facing a sceptical decision maker, the expert has access to a richlanguage to communicate her information. I show that this is akin to her having a largeamount of commitment power. The optimum for the decision maker restricts the expert’sability to credibly communicate intermediate results, inducing the expert to acquire anddisclose full information in equilibrium."