BIG-FISH LIES: A SIMPLE APPLICATION TO MONETARY ECONOMICS

• Autor(a) principal: Griebeler, Marcelo de Carvalho
• Data de Publicação: 2021
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Análise Econômica (Online)
• Texto Completo: https://seer.ufrgs.br/index.php/AnaliseEconomica/article/view/94776
• topic: cheap-talk; Bayesian updating; monetary economics; D83; D01; C79; cheap-talk; Bayesian updating; monetary economics; D83; D01; C79

We provide an alternative to Bayesian updating in cheap-talk games, whichdoes not require the receiver know the sender’s type distribution. This is done throughan anecdotal application, in which a fisherman reports to his friends the size of a fish hecaught in the city’s lake. Our findings show that the fisherman will always report a sizehigher than the mean, and this reported value is independent on the actual size of thecaught fish. This result holds as long as the fisherman presents no aversion to lie and noreputation concerns. We illustrate the applicability of our approach through a simplemodel of monetary economics, in which a central bank must choose the level of theeconomy’s interest rate in order to control inflation based on the inflation expectationreported by heterogeneous and self-interested agents.