Non-Fully Strategic Information Transmission

Building on Crawford and Sobel’s (1982) general communication model, this paper introduces the possibility that players are non-strategic. The sender may be honest and have a preference for speaking truthfully. The receiver may be naive and erroneously believe that the sender is truthful. In contrast to the predictions of the fully-strategic model, we show that there is an equilibrium where communication is in‡ated, information is not lost because of strategic reasons, and the equilibrium outcome is biased. Our …ndings are relevant to understanding communication by …nancial analysts. JEL Classi…cation: C72 (Noncooperative Games), D82 (Asymmetric and Private Information), D83 (Search, Learning, Information and Knowledge). We thank two referees, the Associate Editor, Sandeep Baliga, Marco Battaglini, Thomas de Garidel-Thoron, Harrison Hong, John Morgan, Wojciech Olszewski, Werner Ploberger, Daniel Seidmann, Peter Norman Sørensen, and especially Joel Sobel for very useful conversations. yRegent’s Park, London NW1 4SA, UK. zGower Street, London WC1E 6BT, UK.