Ambiguous Cheap Talk

TL;DR

This paper investigates how ambiguity influences communication in cheap talk models, showing that ambiguity can enhance communication effectiveness by altering the receiver's optimal actions in certain scenarios.

Contribution

It introduces a model where the receiver's evaluation accounts for ambiguity via multiplier preferences and characterizes the receiver's optimal strategy under these conditions.

Findings

Ambiguity can improve communication by shifting the receiver's actions.

The receiver's posterior action remains consistent with the ex-ante action.

Situations where ambiguity enhances communication are relatively common.

Abstract

This paper explores how ambiguity affects communication. We consider a cheap talk model in which the receiver evaluates the sender's message with respect to its worst-case expected payoff generated by multiplier preferences. We characterize the receiver's optimal strategy and show that the receiver's posterior action is consistent with his ex-ante action. We find that in some situations, ambiguity improves communication by shifting the receiver's optimal action upwards, and these situations are not rare.