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Dr. Rossella Argenziano
University of Essex, UK

Abstract: This paper studies a rich yet computable model of strategic information acquisition and communication. We first provide a generalization of the classical model by Crawford and Sobel (1982) to account for possibly noisy sender's information, and find that the value of information is non monotonic in our model. Turning to information acquisition, we find that the decision maker's final action may be more precise in the communication game than in first best, due to the sender's overinvestment in information precision. This result complements the classical results that information is necessarily lost in strategic transmission, but stands in stark contrast with the often claimed implication that communication makes choice imprecise. As a result, when comparing different organizational allocations of the information acquisition and decision tasks, we find that, unlike in Ottaviani (2000) and Dessein (2002), communication may often outperform delegation.

Download full article: “A Numerical Analysis of Strategic Information Acquisition and Transmission”