Seminar in Microeconomics - Matthias Lang (LMU Munich)

Donnerstag, 24. Januar 2019
15:15 – 16:15 Uhr



Matthias Lang (LMU Munich)

"Partial Verifiability with Justifications"

With classical cheap talk, there are clear limits to truthful communication. In natural language, we often use justifications for this purpose. By justification, I refer to a message that transmits information previously unknown by the recipient and that is partially verifiable by the recipient. I apply justifications to a canonical model of bilateral trade. I show that justifications allow for efficient trade in contrast to previous impossibility results for classical cheap talk. To show the strength and power of justification, my model of justification takes things to an extreme. For intuition and experimental scrutiny, I also demonstrate more moderate ways of justification.