Essays on Strategic Communication and Trust in Principal-Agent Models

Emilia Oljemark

Research output: ThesisDoctoral ThesisCollection of Articles

Abstract

This dissertation consists of three essays and an introductory chapter on strategic communication and trust in a principal-agent framework. The first two essays study strategic communication between a sender and a receiver under the presence of incomplete information about the receiver's preferences. In the first essay, the interaction is static, and the sender transmits information concerning a decision-relevant state variable to the receiver who takes an action that affects the welfare of both players. The essay compares communication under two different decision-making protocols and finds that under certain conditions communication is less prone to break down if the sender communicates to a single decision maker than if he communicates to an audience of decision makers who act jointly based on the preferences of the median voter. In the second essay, the sender and the receiver interact repeatedly. The sender learns about the type of the receiver through time by observing her actions. Cooperation ends as soon as the sender learns that the receiver's preferences are not aligned with his. The sender's uncertainty about the type of the receiver gives rise to reputation building in that a receiver who knows that her preferences oppose those of the sender seeks to be perceived as a more congruent type so as to obtain more information. This reputation building is, however, profitable only if the first period is not important to the receiver. The essay finds that there exist parameter specifications of the model under which communication is more efficient ex ante, and thereby all players strictly better off, if the sender is uncertain about the importance of the first period to the receiver. The third essay supports the findings of essay two by studying a repeated trust game between a principal and an agent. The principal is uncertain about the agent's trustworthiness but is able to learn about it through time by observing his actions. The essay compares players' ex-ante welfare across two versions of the model which differ in their informational assumptions concerning the agent's payoffs. There is shown to always exist a set of prior beliefs of the principal about the trustworthiness of the agent for which the ex-ante welfare of players is decreasing in the amount of information that the principal holds about the agent.
Translated title of the contributionEssays on Strategic Communication and Trust in Principal-Agent Models
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
  • Aalto University
Supervisors/Advisors
  • Välimäki, Juuso, Supervising Professor
Publisher
Print ISBNs978-952-60-5987-7
Electronic ISBNs978-952-60-5988-4
Publication statusPublished - 2014
MoE publication typeG5 Doctoral dissertation (article)

Keywords

  • cheap talk
  • trust
  • reputation
  • asymmetric information

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