Bijkerk, S., Karamychev, V. and Swank, O. (2018). When Words are not Enough Journal of Economic Behavior and Organization, 149:294--314.
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Affiliated authors
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Publication year2018
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JournalJournal of Economic Behavior and Organization
Communication through ordinary talk is very common. Often, the receiver of information has the option to investigate a sender{\textquoteright}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.