Navin Kartik

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.

Opinions as incentives

We study costs and benefits of differences of opinion between an adviser and a decision maker. Even when they share the same underlying preferences over decisions, a difference of opinion about payoff‐relevant information leads to strategic information acquisition and transmission. A decision maker faces a fundamental trade‐off: a greater difference of opinion increases an advisers incentives to acquire information but exacerbates the strategic disclosure of any information that is acquired. Nevertheless, when choosing from a rich pool of opinion types, it is optimal for a decision maker to select an adviser with some difference of opinion. Centralization of authority is essential to harness these incentive gains since delegation to the adviser can discourage effort.

Implementation with evidence

We generalize the canonical problem of Nash implementation by allowing agents to voluntarily provide discriminatory signals, i.e., evidence. Evidence can either take the form of hard information or, more generally, have differential but nonprohibitive costs in different states. In such environments, social choice functions that are not Maskin-monotonic can be implemented. We formulate a more general property, evidence monotonicity, and show that this is a necessary condition for implementation. Evidence monotonicity is also sufficient for implementation in economic environments. In some settings, such as when agents have small preferences for honesty, any social choice function is evidence-monotonic. Additional characterizations are obtained for hard evidence. We discuss the relationship between the implementation problem where evidence provision is voluntary and a hypothetical problem where evidence can be chosen by the planner as part of an extended outcome space.

A Note On Cheap Talk and Burned Money

Austen-Smith and Banks (Journal of Economic Theory, 2000) study how money burning can expand the set of pure cheap talk equilibria of Crawford and Sobel (Econometrica, 1982). This note identifies an error in the main Theorem of Austen-Smith and Banks, and provides a variant that preserves some of the important implications. I also prove that generically, cheap talk can be influential in the presence of money burning if and only if it can be influential without money burning. This considerably strengthens a result of Austen-Smith and Banks, but simultaneously uncovers other errors in their analysis. Finally, their conjecture on the continuity of the equilibrium set as the upper bound on burned money shrinks to 0 is proved correct.

Information Transmission with Almost-Cheap Talk

Misrepresenting private information is often costly. This paper studies a model of strategic information transmission based on Crawford and Sobel (1982)(CS), but with a signaling dimension where there is a convex cost of misreporting. I identify a simple condition, called No Incentive to Separate (NITS), that is necessary for a CS equilibrium to be the limit of monotone equilibria as the cost of misreporting shrinks to 0. A CS equilibrium is said to satisfy NITS if the lowest type weakly prefers the action it elicits in the equilibrium to what it would elicit in the complete-information game. I also prove a converse: there is a sequence of monotone equilibria satisfying a forward-induction property that converge to any CS equilibrium satisfying NITS, so long as costless signals are available in addition to the dimension of costly misreporting. It is shown that under a standard regularity condition, only the most informative CS equilibrium satisfies NITS. The results therefore provide a novel rationale for focussing on the most informative equilibrium of the pure cheap talk game, without invoking cooperative justifications such as the ex-ante Pareto criterion. The forward-induction equilibria of the costly misreporting model also possess features that are consistent with certain empirical evidence that is hard to reconcile in a pure cheap talk setting.

Contests for Experimentation

We study contests for innovation with learning about the innovation’s feasibility and opponents’ outcomes. We characterize contests that maximize innovation when the designer chooses a prize-sharing scheme and a disclosure policy. A “public winner-takes-all” contest dominates public contests—where any success is immediately disclosed—with any other prize-sharing scheme as well as winner-takes-all contests with any other disclosure policy. Yet, jointly modifying prize sharing and disclosure can increase innovation. In a broad class of mechanisms, it is optimal to share the prize with disclosure following a certain number of successes; under simple conditions, a “hidden equal-sharing” contest is optimal.

(When) Would I Lie to You? Comment on Deception: The Role of Consequences

This paper reconsiders the evidence on lying or deception presented in Gneezy (2005,American Economic Review). We argue that Gneezy?s data cannot reject the hip?esis that people are one of two kinds: either a person will never lie, or a person will lie whenever she prefers the outcome obtained by lying over the outcome obtained by telling the truth. This implies that so long as lying induces a preferred outcome over truth-telling, a person?s decisi? of whether to lie may be completely insensitive to other changes in the induced outcomes, such as exactly how much she monetarily gains relative to how much she hurts an anonymous partner. We run new but similar experiments to those of Gneezy in order to test this hypothesis. We find that our data cannot reject this hypothesis either, but we also discover substantial differences in behavior between our sub jects and Gneezy?s sub jects.

Investment in concealable information by biased experts

We study a persuasion game in which biased—possibly opposed— experts strategically acquire costly information that they can then conceal or reveal. We show that information acquisition decisions are strategic substitutes when experts have linear preferences over a decision maker’s beliefs. The logic turns on how each expert expects the decision maker’s posterior to be affected by the presence of other experts should he not acquire information that would turn out to be favorable. The decision maker may prefer to solicit advice from just one biased expert even when others—including those biased in the opposite direction—are available. JEL classification: D82, D83.

A Theory of Momentum in Sequential Voting

This paper develops a rational theory of momentum in elections with sequential voting. We analyze a two-candidate election in which some voters are uncertain about the realization of a state variable that can affect their preferences between the candidates. Voters receive private signals about the state and vote in an exogenously fixed sequence, observing the history of votes at each point. We show that there is a strict equilibrium with Posterior-Based Voting: each voter votes for the candidate she believes to be better at the time of casting her vote, taking into account the information revealed in prior votes. In this equilibrium, herding can occur on a candidate with positive probability, and occurs with probability approaching one in large voting games. Our results help understand and have implications for sequential voting mechanisms such as presidential primaries and roll-call voting.

Electoral Ambiguity and Political Representation

We introduce a Downsian model in which policy-relevant information is revealed to the elected politician after the election. The electorate benefits from giving the elected politician some discretion to adapt policies to his information. But limits on discretion are desirable when politicians do not share the electorates policy preferences. Optimal political representation generally consists of a mixture of the delegate (no discretion) and trustee (full discretion) models. Ambiguous electoral platforms are central to achieving beneficial representation. Nevertheless, electoral competition does not ensure optimal representation: the elected politicians platform is generally overly ambiguous. While our theory rationalizes a positive correlation between ambiguity and electoral success, it shows that the relationship need not be causal.