Nondisclosure and Contrary Preferences

Economics

Speaker:Francesco Giovannoni, University of Newcastle
Date: Friday 17 May 2002
Time: 16:15
Location: Room 106 Streatam Court

Further details

(with Daniel Seidmann)

We characterize conditions ("contrary preferences") under which all Sender types send a common (and therefore uninformative) message in a verifiable message game. We argue that our results explain why governments which try to stabilize the exchange rate and central banks which aim to stabilize both output and inflation choose not to be transparent, and why R&D competitors do not share information. We also demonstrate that the availability of verifiable messages may be ex ante disadvantageous to the Receiver when preferences are contrary: more useful information may be revealed in equilibrium if the Sender is restricted to sending cheap talk messages.