Cross-verification and Persuasive Cheap Talk

TL;DR

This paper analyzes a cheap-talk game where experts acquire and advise on information, showing that cross-verification acts as a commitment device, leading to equilibrium payoffs equivalent to truthful reporting.

Contribution

It demonstrates how cross-verification enables credible advice in cheap-talk games without commitment, establishing equilibrium existence with truthful-like payoffs.

Findings

Cross-verification functions as a commitment device.

Equilibrium exists with payoffs matching truthful reporting.

Experts' advice can be credible despite lack of commitment.

Abstract

We study a cheap-talk game where two experts first choose what information to acquire and then offer advice to a decision-maker whose actions affect the welfare of all. The experts cannot commit to reporting strategies. Yet, we show that the decision-maker's ability to cross-verify the experts' advice acts as a commitment device for the experts. We prove the existence of an equilibrium, where an expert's equilibrium payoff is equal to what he would obtain if he could commit to truthfully revealing his information.