Francesco Squintani

Credulity, Lies, and Costly Talk

This paper studies a model of strategic communication by an informed and upwardly biased sender to one or more receivers. Applications include situations in which (i) it is costly for the sender to misrepresent information, due to legal, technological, or moral constraints, or (ii) receivers may be credulous and blindly believe the sender’s recommendation. In contrast to the predictions obtained in Crawford and Sobel’s [9] benchmark cheap talk model, our model admits a fully separating equilibrium, provided that the state space is unbounded above. The language used in equilibrium is in∞ated and naive receivers are deceived.

Mediation, arbitration and negotiation

We compare three common dispute resolution processes – negotiation, mediation, and arbitration – in the framework of Crawford and Sobel [V. Crawford, J. Sobel, Strategic information transmission, Econometrica 50 (6) (1982) 1431–1451]. Under negotiation, the two parties engage in (possibly arbitrarily long) face-to-face cheap talk. Under mediation, the parties communicate with a neutral third party who makes a non-binding recommendation. Under arbitration, the two parties commit to conform to the third party recommendation. We characterize and compare the optimal mediation and arbitration procedures. Both mediators and arbitrators should optimally filter information, but mediators should also add noise to it. We find that unmediated negotiation performs as well as mediation if and only if the degree of conflict between the parties is low.

Strategic information transmission networks

We study a model of multi-player communication. Privately informed decision makers have different preferences about the actions they take, and communicate to influence each othersʼ actions in their favor. We prove that the equilibrium capability of any player to send a truthful message to a set of players depends not only on the preference composition of those players, but also on the number of players truthfully communicating with each one of them. We establish that the equilibrium welfare depends not only on the number of truthful messages sent in equilibrium, but also on how evenly truthful messages are distributed across decision makers.

Naive audience and communication bias

We introduce the possibility that the receiver naively believes the sender’s message in a game of information transmission with partially aligned objectives. We characterize an equilibrium in which the communication language is inflated, the action taken is biased, and the information transmitted is more precise than in the benchmark fully-strategic model. We provide comparative statics results with respect to the amount of asymmetric information, the proportion of naive receivers, and the size of the sender’s bias. As the state space grows unbounded, the equilibrium converges to the fully-revealing equilibrium that results in the limit case with unbounded state space.

Imitation and Experimentation in Changing Contests

This paper analyzes the equilibrium play of individuals that are randomly matched to play a contest where the dominant action changes over time. Under myopic decision making, players adopt imitation strategies similar to those observed in evolutionary models with sampling from past play in the population. If the players are patient, equilibrium strategies display elements of experimentation in addition to imitation. If the changes in the environment are infrequent enough, these strategies succeed in coordinating almost all of the players on the dominant action almost all of the time. The myopic rules, on the other hand, result in miscoordination for a positive fraction of time. Journal of Economic Literature Classification Numbers: C73, D83, D84.

Moral hazard, renegotiation, and forgetfulness

When a principal and an agent operate with simple contracts, in equilibrium, renegotiation will occur after the agent takes her action. Since renegotiation makes incentive contracts non-credible, the principal may prefer non-renegotiable monitoring options. The current literature does not fully reconcile these predictions with the observation of simple, non-renegotiated incentive contracts. We model a principal-agent interaction in a social learning framework, and assume that when renegotiation is not observed, agents may forget its feasibility with infinitesimal probability. In the unique stable state of our model, renegotiation occurs with infinitesimal frequency, and second-best simple incentive contracts appear with non-negligible frequency.

A Vindication of Responsible Parties

Electoral platform convergence is perceived unfavorably by both the popular press and many academic scholars. This paper provides a formal account of these perceived negative effects. We show that when parties do not know voters’ preferences perfectly, voters prefer some platform divergence to the convergent policy outcome of competition between opportunistic, office-motivated, parties. We characterize when voters prefer responsible parties (which weight policy positively in their utility function) to oppor- tunistic ones. Voters prefer responsible parties when office benefits and concentration of moderate voters are high enough relative to the ideological polarization between parties. In particular, with optimally-chosen office benefits, responsible parties improve welfare.

Dispute Resolution Institutions and Strategic Militarization

A central question in political science is how to best manage information asymmetries and commitment problems when disputes arise between states or nations. We argue that common framings of this problem miss an important feature: the institutions determining how disputes are resolved shape the incentives for nations to enter disputes. Because war can be sometimes understood as the down-side risk from entering a dispute, institutions that reduce the chances of war-fighting may induce perverse incentives to enter into disputes and militarize. We develop a simple crisis model that captures both the militarization decisions and bargaining behavior. We examine how features like direct communication and third-party involvement alter the incentives. Seemingly effective institutions that improve the chance of peace for a given distribution of military strength, can actually lower the chance of peace once one accounts for distortions to militarization decisions. To illustrate the value of this broader perspective we show how a form of intervention by a mediator concerned only with resolving the current crisis, turns out to create optimal militarization and bargaining incentives.

Contracts, Liability Restrictions and Costly Verification

This paper describes simple contract-theoretical settings where the parties optimally choose to stipulate unverifiable or unenforceable contracts. The only manner to achieve the first-best is to stipulate a roundabout contract that explicitly prohibits the optimal outcome, while secretly agreeing to breach this written agreement in equilibrium so as to achieve the first-best. We introduce a general representation of enforceability constraints that encompasses both technological and institutional constraints. Enforceable contracts are shown to be undominated if and only if verification is costless (so that the courts knowledge satisfies the axiom of positive introspection), and the parties are not subject to liability limitations such as a damage-compensation restriction on transfers, or individual liability rule.