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EconomicsPart of Economic, Social and Political Science

1701 Endogenous ambiguity in cheap talk (Christian Kellner & Mark Thordal-Le Quement)

Authors: Christian Kellner (University of Southampton) & Mark Thordal-Le Quement (University of Bonn)

Paper number 1701

Abstract

This paper proposes a model of ambiguous language.  We consider a cheap talk game in which a (possibly ambiguity averse) sender who faces an ambiguity averse receiver is able to randomize according to unknown probabilities.  We sho that under fairly general conditions, for any standard influential communication equilibrium there exists a Pareto-dominant equilibrium featruing an ambiguous (i.e. Ellsbergian) communication strategy.  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 finer information transmission.

 

 

 

 

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