Confidence and competence in communication

Research output: Contribution to journalArticle

Abstract

This paper studies information transmission between an uninformed decision maker (receiver) and an informed agent (sender) who have asymmetric beliefs (“confidence”) on the sender’s ability (“competence”) to observe the state of nature. We find that even when the material payoffs of the players are perfectly aligned, the sender’s over- and underconfidence on his information give rise to information loss in communication, although they do not by themselves completely eliminate information transmission in equilibrium. However, an underconfident sender may prefer no communication to informative communication. We also show that when the sender is biased, overconfidence can lead to more information transmission and welfare improvement.

Original languageEnglish
Pages (from-to)233-259
Number of pages27
JournalTheory and Decision
Volume78
Issue number2
DOIs
Publication statusPublished - 2014 Jan 1

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Keywords

  • Cheap talk
  • Communication apprehension
  • Overconfidence
  • Underconfidence

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Developmental and Educational Psychology
  • Arts and Humanities (miscellaneous)
  • Applied Psychology
  • Social Sciences(all)
  • Economics, Econometrics and Finance(all)
  • Computer Science Applications

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