Paper #1759

Title:

Toxic types and infectious communication breakdown

Authors:

Kfir Eliaz and Alexander Frug

Date:

December 2020

Abstract:

We introduce a new channel for breakdown of cheap talk communication between an informed sender and an uninformed receiver. Our framework has the following novel feature: conditional on interacting, both parties agree on the optimal action in each state, but there are sender types with which the receiver prefers not to interact. We show that for a broad class of preferences, any interval equilibrium induces only finitely many actions in the support of the receiver's strategy. We also show that introducing a second stage with noisy signals on the sender type has a dramatic effect on the firststage communication.

Keywords:

Cheap talk, contagion

JEL codes:

D83.

Area of Research:

Microeconomics

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