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Information Transmission in Nested Sender-Receiver Games

Author

Listed:
  • Ying Chen

    (Key Laboratory of Inorganic Functional Materials and Devices - Shanghai Institute of Ceramics - CAS - Chinese Academy of Sciences [Beijing])

  • Sidartha Gordon

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

We introduce a "nestedness" relation for a general class of sender-receiver games and compare equilibrium properties, in particular the amount of information transmitted, across games that are nested. Roughly, game is nested in game if the players's optimal actions are closer in game. We show that under some conditions, more information is transmitted in the nested game in the sense that the receiver's expected equilibrium payoff is higher. The results generalize the comparative statics and welfare comparisons with respect to preferences in the seminal paper of Crawford and Sobel (1982). We also derive new results with respect to changes in priors in addition to changes in preferences. We illustrate the usefulness of the results in three applications: (i) delegation to an intermediary with a different prior, the choice between centralization and delegation, and two-way communication with an informed principal.

Suggested Citation

  • Ying Chen & Sidartha Gordon, 2014. "Information Transmission in Nested Sender-Receiver Games," SciencePo Working papers Main hal-00973071, HAL.
    • Handle: RePEc:hal:spmain:hal-00973071
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-00973071
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    References listed on IDEAS

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    1. Watson, Joel, 1996. "Information Transmission When the Informed Party Is Confused," Games and Economic Behavior, Elsevier, vol. 12(1), pages 143-161, January.
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    8. Milton Harris & Artur Raviv, 2005. "Allocation of Decision-making Authority," Review of Finance, Springer, vol. 9(3), pages 353-383, September.
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    Keywords

    sender-receiver games; information transmission; nestedness; inter- mediary; delegation; informed principal.;
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