Skip to Main content Skip to Navigation
New interface
Journal articles

Informational cascades elicit private information

Abstract : We introduce cheap talk in a dynamic investment model with information externalities. We first show how social learning adversely affects the credibility of cheap talk messages. Next, we show how an informational cascade makes truth-telling incentive compatible. A separating equilibrium only exists for high-surplus projects. Both an investment subsidy and an investment tax can increase welfare. The more precise the sender's information, the higher her incentives to truthfully reveal her private information.
Document type :
Journal articles
Complete list of metadata
Contributor : Caroline Bauer Connect in order to contact the contributor
Submitted on : Tuesday, November 20, 2012 - 8:46:58 AM
Last modification on : Wednesday, January 26, 2022 - 3:40:38 AM

Links full text




Olivier Gossner, Nicolas Melissas. Informational cascades elicit private information. International Economic Review, 2006, 47 (1), pp.297-325. ⟨10.1111/j.1468-2354.2006.00380.x⟩. ⟨halshs-00754174⟩



Record views