Separating the Wheat from the Chaff

TL;DR

This paper analyzes a reputation game where a judge must identify an expert from a less reliable speaker, revealing that equilibrium strategies favor extremism and that increased information can improve learning but also widen informational gaps.

Contribution

It introduces a model of reputation in a cheap-talk environment with an expert and a quack, showing how extremism and strategic mimicry influence truthful communication and learning.

Findings

Equilibrium involves honest expert signals and extremism bias.

Mimicry by the quack can sometimes sway the judge.

More precise private information enhances the likelihood of identifying the expert.

Abstract

We study a reputational cheap-talk environment in which a judge, who is privately and imperfectly informed about a state, must choose between two speakers of unknown reliability. Exactly one speaker is an expert who perfectly observes the state, while the other is a quack with no information. Both speakers seek to be selected, while the judge wishes to identify the expert. We show that, quite generally, there is an equilibrium in which the expert is honest, yet the judge favors more extreme signals. This bias toward extremism does not induce exaggeration by the expert, but instead sustains truthful communication. The quack strategically mimics the expert's speech, and sometimes panders to the judge's prior. We show that learning in this environment exhibits an ``information begets information'' property: judges with more precise private information are more likely to identify the expert and learn the true state, implying that exposure to competing sources of uncertain reliability may amplify informational inequality across audiences.