, Volume 35, Issue 1, pp 129-150
Date: 22 Nov 2006

Naive audience and communication bias

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Abstract

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.