2018•The New Palgrave Dictionary of EconomicsRequires access
Cheap Talk
Vijay Krishna, John M. Morgan
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Abstract
Cheap-talk models address the question of how much information can be credibly transmitted when communication is direct and costless. When a single informed expert, who is biased, gives advice to a decision maker, only noisy information can be credibly transmitted. The more biased the expert is, the noisier the information. The decision maker can improve information transmission by: ( a ) more extensive communication, ( b ) soliciting advice from additional experts, or ( c ) writing contracts with the expert.