Abstract
Communication through ordinary talk is very common. Often, the receiver of information has the option to investigate a sender’s type. We extend a standard cheap-talk model by giving the receiver this option. We show that when the receiver bears most of the investigation cost, the option to investigate drives away most cheap-talk communication. When the sender pays a substantial part of the investigation cost, the option to investigate disciplines the sender. Introducing an investigation device to a cheap-talk model demonstrates the vulnerability of cheap talk on the one hand, and shows how communication can be improved on the other.
Original language | English |
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Pages (from-to) | 294-314 |
Number of pages | 21 |
Journal | Journal of Economic Behavior and Organization |
Volume | 149 |
DOIs | |
Publication status | Published - 16 Apr 2018 |