We investigate strategic information transmission with communication error, or noise. Our main finding is that adding noise can improve welfare. With quadratic preferences-and a uniform Pipe distribution, welfare can be raised for almost every bias level by introducing a sufficiently small amount of noise. Furthermore, there eidsts a level of noise that makes it possible to achieve the best payoff that can be obtained by means of any communication device. As in the-model Without noise, equilibria are interval partitional; with noise, however, coding (the measure of the message space used by each interval of the equilibrium partition of the type space) becomes critically important.
|Original language||English (US)|
|Number of pages||46|
|State||Published - Dec 1 2007|
- Cheap talk
- Information transmission
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)