Confidence and competence in communication

Kohei Kawamura

Research output: Contribution to journalArticlepeer-review

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
JournalTheory and Decision
Volume78
Issue number2
Early online date13 Feb 2014
DOIs
Publication statusPublished - 1 Feb 2015

Keywords

  • overconfidence
  • underconfidence
  • communication apprehension
  • cheap talk
  • D03
  • D83

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