Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320260 
Year of Publication: 
2024
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 19 [Issue:] 3 [Year:] 2024 [Pages:] 1057-1086
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
A Bayesian agent experiences gain-loss utility each period over changes in belief about future consumption (''news utility''), with diminishing sensitivity over the magnitude of news. Diminishing sensitivity induces a preference over news skewness: gradual bad news, one-shot good news is worse than one-shot resolution, which is in turn worse than gradual good news, one-shot bad news. So, the agent's preference between gradual information and one-shot resolution can depend on his consumption ranking of different states. In a dynamic cheap-talk framework where a benevolent sender communicates the state over multiple periods, the babbling equilibrium is essentially unique when the receiver is not loss averse. Contrary to the commitment case, more loss-averse receivers may enjoy higher news utility in equilibrium. We characterize the family of gradual good news equilibria when facing such receivers and find the sender conveys progressively larger pieces of good news.
Subjects: 
Diminishing sensitivity
news utility
dynamic information
cheap talk
preference over skewness of information
JEL: 
D83
D91
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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