UC San Diego

The dissertation studies several topics about strategic information transmission, in particular, how the outcome is influenced by cognitive capacity and communication cost; and how a decision maker should organize the procedure of requesting advice from multiple experts. In Chapter 1, I analyze how a principal should influence an agent’s incentive in processing information about multiple issues when they have conflict about relative importance. I show that because it is costly for the agent to process information, it is not necessarily beneficial for the principal to provide a higher reward for better quality of information processed (even when rewards do not involve payout from the principal) or to request the agent to process more information. I characterize when the benefit of more attention induced by a higher reward or more information available would be dominated by the cost of attention distortion, and show that the result is not monotonic in the agent’s cost of attention and the relevance between issues. In Chapter 2, we consider a manager’s problem about requesting support from multiple experts to implement one (of many) projects. The game in which the manager consults experts simultaneously typically has multiple equilibria, including one in which the manager’s favorite project is supported by some expert. In the leading case, we show that only one equilibrium outcome survives iterative deletion of weakly dominated strategies which is the experts’ most preferred equilibrium. We identify sequential procedures that perform equally well as this equilibrium from the manager’s perspective. In Chapter 3, we study a voluntary disclosure game in which a firm discloses a signal about the future cash flow subject to proprietary costs or uncertainty about signal endowment, and rationally inattentive investors allocate their attention to disclosures. We find that for low levels of attention, more attention facilitates communication and increases disclosure; for high levels of attention, more attention better identifies, and therefore deters, unfavorable disclosure. In Chapter 4, we examine the impact of a sender’s communication cost on information transmission by introducing cost to the cheap talk model. We show that the sender’s cost, imprecision of his signal, and disagreement over actions between players could lead to better communication outcomes. A moderate cost makes the sender’s message more credible to the receiver, while less signal precision or more disagreement motivates the sender to provide more information.