Tailored Cheap Talk

Tailored Cheap Talk

By Pedro M. Gardete, Yakov Bart
May 2017Working Paper No. 3400

We consider a persuasion setting in which an agent tries to elicit a desired action from a receiver by means of a compelling argument. In order to understand which arguments may indeed be compelling, the persuader can use information about the receiver’s preferences prior to the communication stage. This simple arrangement can lead to complex consequences because the receiver understands that the communication may have been appropriately tailored to appear persuasive. We find that the sender prefers not to learn the receiver’s preferences with certainty, but to remain in a state of willful ignorance. The receiver prefers complete privacy unless disclosure is necessary to induce communication. We also find that the parties may fail to trade at intermediate communication cost levels. In other cases, the content and cost of communication can affect market outcomes through concurrent mechanisms. Finally, in general, the sender’s first-best outcome involves pooling with unattractive sender types: he prefers to stay relatively guarded about aspects he is knowledgeable of in order to hinder the receiver’s discernment when topics he does not master are touched upon. Our results are discussed in the contexts of matching markets, including online advertising, sales, expert advice, dating and job search.