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Rational and Boundedly Rational Behavior in a Binary Choice Sender-Receiver Game Author(s): Massimiliano Landi and Domenico Colucci

Reviewed work(s): Source: The Journal of Conflict Resolution, Vol. 52, No. 5 (Oct., 2008), pp. 665-686 Published by: Sage Publications, Inc. Stable URL: http://www.jstor.org/stable/27638633 . Accessed: 04/12/2012 10:57
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Journal of Conflict Resolution Volume 52 Number 5 October 2008 665-686 ? 2008 Sage Publications

Rational

Behavior
Massimiliano

and Boundedly Game

Rational -

io-h ?
*

!*,?

Sender-Receiver
Landi School ofEconomics Singapore Management Domenico Colucci

in a Binary Choice

http://jcr.sagepub.com

^,^,^1

University, Singapore

Mathematics for Decisions Department of University ofFlorence, Italy


The sent by Osama bin this situation as They model a signaling game a population in which of receivers takes a binary choice, the out come is decided by majority and sender receivers have rule, interests, and conflicting there is uncertainty the about both players' degree of rationality. They characterize authors the strategic rationale investigate on the eve of the 2004 U.S. Presidential behind the message elections. structure of the sequential of the game as a function of the parameters gov equilibria the uncertainty and find that in all pure strategy equilibria, the outcome most of the above-mentioned preferred by the rational sender is chosen. An explanation events relies crucially on the relative likelihood of rational and naive players: If a suf erning is posited, then our model ficient departure from full rationality of the electorate sug succeeded that bin in Laden's message gests tilting the race toward his pre-electoral preferred outcome. Keywords: cheap talk; elections; bounded rationality; terrorism

Laden

The

weekend before the 2004 U.S. presidential elections, the Al Jazeera TV network aired a videotaped address fromOsama bin Laden (OBL, henceforth)
the American people. Apparently the message was not about the impend

targeting

ing elections (Al Jazeera 2004):


of America: People another Manhattan, This

talk of mine

and deals with

the war

is for you and concerns the ideal way and its causes and results.

to prevent

The timing of the message and its very ending though, leave littledoubts about the fact that itwas indeedmeant to influence theAmerican voters. Quoting again from the message (Al Jazeera 2004):
Authors' Note: We thank Vincent Crawford and Domenico Menicucci for discussions and comments

on this article.

665

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666

Journal of Conflict Resolution

The wise man liar in theWhite the hands

doesn't

House.

of Kerry,

and children for the sake of the squander his security, wealth, In conclusion, I tell you in truth, that your security is not in nor Bush, nor al-Qaida. No. Your security is in your own hands. to ascertain several reelect whether or not the message agreed Bush.1 For on had the

Unfortunately, a significant conclusion

there are no direct impact on the vote.

ways

However, helped

commentators George W.

that the message

ple, quoting fromKrauthammer (2004):


With the election

actually

exam

development the war on save

in the balance, the campaign some improbable awaited hanging to tip the scale. Re-enter Osama bin Laden. By reminding us of 9/11 and invoked the only thing that could trump Iraq?and terrorism, bin Laden the President. His chilling reappearance reminded us of our peril, put Iraq in per

to the President's and played precisely success and strength?success and was never one to in Baghdad. Bin Laden strength that he so squandered remotely the American mind. He understand 9/11?and he pulled his spectacularly misjudged nemesis over the finish line. (p. 50) spective

A piece of (admittedly indirect) evidence supporting the above view can be found in Cohen et al. (2005): in late September 2004, the authors conducted an experi
ment,

and the recollection of the facts of 9/11 would tend to substantially displace votes fromKerry to Bush. This is corroborated by pre-electoral polls that found Bush to be clearly favored over Kerry in handling terrorism (Campbell 2005). These find sortie in the closing days of the campaign might have ings suggest thatOBL's affected the vote, helping President Bush's reelection. So we take it as a working hypothesis that the tape indeed influenced ballot

showing

that a shift

in the public's

attention

onto

themes

such

as

terrorism

derstand theAmerican voters?Was his implied position on U.S. election (opposing Bush and endorsing Kerry) a lie or a truthful revelation of his view? Did theAmeri
can voters OBL's by give message any credit is an example to the message? to influence of an attempt the result of an election a costless The number of cases in which message. using

behavior. The interpretationof ourmodel also benefits from assuming that the face value of OBL's words boiled down to opposing George W. Bush and hence endor model. sing JohnF. Kerry, but this is not strictlyrequired to build the we answers to seek the Did OBL really misun Ultimately, following questions:

an external

significant outside personalities or organizations endorse (more or less explicitly) one candidate is surely large. An example is the Economist's tough stand on Mr. Berlusconi (pictured as unfit to lead Italy) before both the 2001 and the 2006
Italian

personality

national television in May 2006, of one of the candidates for the incoming presi dential elections inMexico. Nevertheless, OBL's role and his message's timing, media make it a rather novel event in the political scenery content, and echo in the

general

elections.

Another

is

subcommander

Marcos's

endorsement,

on

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

667

and calls, in our opinion, for an explanation that should be anchored on empirically credible initial responses' behavior.2 We consider a game ? la Crawford and Sobel (1982) played between one sender
and a population of receivers. take The a sender has private information a about a state vari from able while the receivers binary action after observing public message

the sender.Majority rule determines the choice implemented, which, togetherwith the prevailing state, determines the payoffs for all players. In the benchmark case, Under this setup, it iswell known that sender and receivers have opposite interests. choose the action that, ex ante, maximizes
case, OBL's message could not have shifted in any equilibrium, the sender uses only uninformative messages of Bush. and the receivers

their expected payoff. This being the


votes in favor

To account for this possibility, we introduce a structural model of interaction and behavioral that resembles rational Crawford's (2003) between fully players to the mislead Germans of the Allies' successful about where they attempt analysis would land on D-Day in 1944.While Crawford considers the transmission of infor
mation about intended

information. The uncertainty for both receivers and sender about the degree of sophistication of their opponent induces a game of incomplete informationwhose The interpretationof the events relies crucially on the relative likelihood ofmortal and sophisticated players. Nonetheless, in all the pure strategies equilibria of the game, the outcome most preferred by the (rational) sender is selected. These find ings extend the results of Crawford to our case. With respect to thementioned contest between OBL and U.S. voters, if a sufficientdeparture from full rationality
of the electorate message is assumed, succeeded then our model the race supports toward the idea that OBL's he preferred. pr? ?lectoral in tilting the outcome equilibria are studied as a function of the parameters governing this uncertainty.

play,

we

focus

on

the

transmission

of private

exogenous

mind can The strategic interactionbetween OBL and theU.S. voters we have in relative be explained as follows: Let the state of the world represent OBL's on as a influence Islamic Mid leader and his communities in the terrorist strength dle East and worldwide. This can be seen, from the point of view of theAmerican
electorate, voters

U.S. national security. In a "high" state,OBL


a risk of a terrorist attack. higher perceive ter option. and OBL Conversely, prefers Kerry

as a proxy

for the (exogenous)

seriousness

of OBL's

imminent

threat

to

is strong and influential and theU.S.


As a result, they see Bush U.S. as a bet pol a less aggressive foreign

icy. In a "low"
on create

state, OBL
masses

is relatively weak
This makes the angered

in the sense that his outlook for


him prefer aggressive al-Qaida. U.S. Vice policies versa, the toward

control that can

Islamic

is poor:

conditions

that drive

U.S.

citizens prefer a foreign policy more


cost them less, and see Kerry Insofar as our motivating

inclined toward diplomacy thatwould


alternative. scenario is inevitably rather arbi

probably

as a better

one might thinkof resorting to thehistorical events as of 2004 Election Day as trary, a guide to shed lighton things,but this is hardly a way to avoid difficulties,because

story for a two-states

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668

Journal of Conflict Resolution

itwould require some kind of counterfactual analysis for which scientific grounding is hard to find.
At no the time of the message, was on the game natural candidates' In this only positions respect, OBL were we and spelled that the U.S. out time for changes to focus available. believe and clearly, it is a sensible

assumption

between

voters.

We

choose tomodel
seems quite

the type of uncertainty following Crawford (2003), as this


given the idiosyncratic nature of the events. In fact,

unlike similar applications of strategic information transmission, such as Sobel (1985) and Benabou and Laroque (1992), the novelty of the scenario does not leave
room for

approach

out thepossibility for testing the play ofmixed strategies.3


We therefore assume that each player is either rational or naive.

learning

or

reputation

considerations.

The

same

lack

of

repetition Rational

rules

play the incomplete information game that is obtained by introducing the possibi lity of naive players and follow the standard equilibrium behavior. Naive players are built following the logic of level-k thinkingmodels that appear in the beha vioral game theory literature (see, e.g., Stahl andWilson 1994, 1995). In a nutshell, players form some simplified beliefs about their opponents' play and then best lar concepts that are typical of equilibrium reasoning. Different levels of sophisti cation imply different types of expectations. Thus, at the bottom of the scale, we
have case, level 0 players, whose behavior who is determined reveals the level 0 player is a sender an exogenous In our motive. by the true state of the world. One step respond to that. These players are naive in the sense that they do not use the circu

players

above is the class of level 1 receivers: They believe the population of sender to be formed by level 0 players only and therefore choose the strategy that is a best
response infinite to that. Moving sequence one step above in a recursive since we way, have we can generate game, only an a of behavioral types. Clearly, a finite

matters. it is only theirbehavior that Such a structure of boundedly rational decision rules has been shown to be a well-grounded starting point for modeling initial responses to novel situations. behavior in experi Examples beyond theworks previously cited include first-round mental guessing games, as in Nagel (1995) and Costa-Gomes and Crawford
(2006), and estimated

finite number of them behave differently.There is no loss of generality in restrict ing our analysis only to them, since from the point of view of the rational players,

Gomes, Crawford, and Broseta (2001). The related model of cognitive hierarchy developed by Camerer, Ho, and Chong (2004) also shows good fit to empirical data
from various

types

in a series

of two-person

normal-form

games

in Costa

with possibly boundedly Related research on transmission of private information rational players includes Kartik, Ottaviani, and Squintani (2006), and Chen (2006).
The

experimental

games.

pool of receivers (who may be partially naive) inwhich talk can be inherentlycostly.
The state of the world is a continuous random variable with an unbounded support.

first group

of authors

considers

a communication

game

between

a sender

and

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

669

Chen is similar but has a state that is uniform in [0, 1] and assumes nonstrategic types of players who are in fact optimizers given theirutility functions (so there is actually no bounded rationality in her model). Besides the finiteness of the state,message, we allow for and action spaces, the present article differs from both, in the sense that
a more Moreover, complex structure in Chen, the outcome rational of boundedly is not determined types for both sender rule. and receivers. by majority

Our model also relates to Farrell and Gibbons


two different public and receivers. cannot be The sent main differences are to only one subgroup rule, so that, in particular, se does not

(1989), where the sender faces


in our case, and the message the outcome is not addi is is receivers, the sender's

that, of

determined

tively separable in the actions of different groups within the population of recei
vers.

by majority rule

payoff

receiver case. The distinctive feature of our model


about players' degree of sophistication.

Majority

per

change

the outcome

with

respect

to the one

is in the addition of uncertainty

The role of the sophisticated receivers mirrors the equilibrium play of the unin formed independents in Feddersen and Pesendorfer (1996), who mix between abstaining and voting for the candidate with less partisan support, to increase the probability that the informed independents be pivotal to the election. Yet, there is a substantial difference: The behavior of the sophisticated players in our model is When the prob purely driven by their strategic interactionwith their counterpart. a is sender the of sufficiently high, ability sophisticated sophisticated receivers
need which to vote requires so that the electoral them outcome does not depend of the mortal on the signal observed, to counterbalance the play receivers.

Our article is mainly motivated by the interest in the episode of OBL versus voters at the eve of 2004 elections and thereforeposits a clear clash in the interests
of those actors. (some Because events whether of which the analysis are mentioned payoff and might above) are be relevant where negatively voters may or to interpret other similar not be certain about correlated, we

the sender's

theirs

also extend our model to allow formore examples from real politics to fit in our framework. This part is akin to Sobel (1985) and entails that the receivers face an additional level of uncertainty in choosing what to do. The article is organized as follows: Section 2 discusses themodel in its general
form. relation Section between 3 extends sender the model and to account Section for uncertainty 4 concludes. about the payoffs cor receivers.

positively

The Base Model


? = respectively,p and 1 p. Let S {S\, S2}. There are two groups of players, a sender state the of the who knows world, and a population (continuum) of receivers (PI), not The know it. sender sends a public message m eM = {m\,M2} to who do (P2),
Suppose there are two states of the world, S\ and S2, whose probabilities are,

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670

Journal of Conflict Resolution

Figure 1 the Actions Given (Um and Dm) of the Payoffs Majority of Receivers and the State of Nature (Two States), with b > 0. pi p^

pn

Urn

b-b

0, S^

pn

Urn Dm

0,
1,-1

receivers, who in turnchoose an action aeA ? {U,D}. The payoffs for all players depend on the state of nature and on the action of (themajority of) the receivers and are reported inFigure 1.
Notice that, in each state, the sender and the receivers have

A pure strategy for the sender is a function from the state of theworld space (S) to themessage space (M). A pure strategy for the receivers is a function from the message space (M) to the action space (A). So both types of players have four pure strategies. In what follows, (mi, m2) denotes the pure strategyby which message m\ is sent if the state is Si and message m2 if the state is S2. Similarly, (U, D) denotes the pure strategy that prescribes choosing action U if themessage is m\ and action D if the message ism2. Mixed strategies are probability distributions over the set of pure strategies. We
use

conflicting

interests.

three-dimensional simplex with respect to the set of pure strategies {(mi, mi), (mi, ^2), (^2, ^1), (^2, ^2)}. Similarly, for receivers, (?]? ?2, ?3, ?4) denotes an ele ment of the three-dimensional simplex with respect to the set of pure strategies {(?/, t/),(i/,D),(D,t/),(D,D)}.
For assigns (m2, mi), example, probabilities and the sender's 0, 0.5, mixed 0.1, and strategy 0.4 (0, 0.5, 0.1, 0.4) means that the sender (m}, m2), to the pure strategies (mi, mi),

the following

notation:

for the sender,

(oci, ot2, 0C3, 0C4) denotes

an element

of the

(m2, m2).

Finally let jidenote the posterior probability that the true state of theworld is S\ after observing message mj and r\ the probability that the state be Si given m2. These probabilities depend on p and on the strategy adopted by the sender, and are
computed, whenever possible, through Bayes' rule as follows:

p(oLi+ a2) p(ai +a2) + (l-p)(ai


_/7(0C3+a4)_

+a3)

(1) (2)

+ (l-/?)(oc2 + a4) /?(a3-r-a4)

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

671

In the remainder of this section,we firstdescribe the equilibria of the game with only rational players, then introduce bounded rationality along the lines of Crawford (2003) and look at the equilibria of the game between the sophisticated players.
We shall assume

veyed, the expected payoff fromchoosing either alternative in the election is the same.
We have in mind a scenario in which, ex ante, voters are indifferent between the can

that ph?\?p,

which

means

that, before

the message

is con

didates, whom are thereforeequally plausible to be elected.We use this condition as an approximation of the idea of a close race, as it was the case in the 2004 presidential
election. (i.e., where still pb?\?p Finally, be In this respect, for whom ours one is a model option of swing than voters. One could add partisan could voters voters citizens is better the other, irrespective a close election independent case, of the realiza be one

tion of the state of nature) partisans pivotal would we of both to

into the picture. sides are of equal Therefore, to have receivers

In this case, size. As even

a result, in such outcome the action

would of

the outcome. still be needed

the electoral choose

the assumption ex ante uncertain.4 that maximizes

assume

that

their

expected payoff as if theywere pivotal in the election. This restriction ismotivated by the need to reduce the set of equilibria, which is typically large in voting
games.5 brium. The The solution symmetry concept condition we work on all is that of the rational symmetric receivers sequential to adopt requires equili the same

(pure ormixed) strategy. Under full rationality, the following result (which is very much in the spirit of Crawford and Sobel 1982) holds: Proposition
receivers, true state

1. In the sequential equilibria of the game between rational sender and


does any not reveal information about the strategy that induces an electoral

outcome that does not depend on the message

are such that the sender the strategies = choose 0C3) and the receivers (i.e., a2

< ?2+ ?4,or ?! + ?2= 1/2=?2+ ?4) ?,+ ?2< l/2


strategy for which a2 ^
oc2 > 0C3: the receiver respond playing would Proof. Consider a mixed strategy for the sender:

(i.e., ?j + ?2 >

> or 1/2 $2 + ?4>


= oc2

either

0C3 cannot be part of an equilibrium. Indeed, suppose


then optimally same The choose logic (U, D). rules out In turn, the sender oc2 <a3. Given would 0i2 = 0C3,

oc2 ^

0C3 or

0C3. A

best

receivers' posterior probabilities on the state equal the priors (see equations 1 and 2).
Therefore, receivers are indifferent between U and D. Suppose that on observing m\,

(rri2, m\).

respectively ra2, theymix in such a way to induce U (i.e., ?j + ?2 > 1/2), respec tivelyD (i.e., ?i -f?3 < 1/2):The sender's best response would be (m2,m\), which
violates a2 = 0C3. Likewise, we can dismiss the possibility that receivers mix

so

that ?i + ?2 < 1/2 and ?1 + ?3 > 1/2.Having ruled out receivers' strategies indu cing outcomes that change with themessage, we are leftwith three possibilities:

= and ?, + ?3> 1/2; and ?, + ?3< 1/2; ?i + ?2= l/2 ?,+ ?2> 1/2 ?, + ?2< 1/2
> < ?2 + ?4. Finally, observe that?, + ?3 1/2 if and only if ?2 + ?4

1/2. In all these

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672

Journal of Conflict Resolution

cases,

the sender with

is indifferent a2 = 0C3.

between

sending

any message

in each

state and

there

fore can mix

Proposition
ests, receivers

1 implies thatwhen players are rational and have conflicting inter


do not change their priors upon receiving the signal, so their choice

at the voting stage is not affected by it.Thus, given the initial uncertainty about the
best way possible receivers action, vote. the message Their choice, sent does with not have any impact whatsoever remains in the or without any message, the same.

Therefore, ifwe believe that the message


we need to look for alternative

sent by OBL
frameworks.

had an impact on the elec


The one we propose is the

toral outcome,

following: Players are assumed to be unsure about the degree of rationality of their opponents, who may be fully rational (and we call them "sophisticated") or follow a
behavioral norm of conduct (and we call them "mortal"). Mortal

beliefs about the distributionof opponents and maximize theirexpected payoff given
those beliefs. Iteration of best level responses 0 who sender expect generates always the sender the set of behavioral chooses (mi, m2). We to be a types we call con sider. We "truth assume The that a this type a therefore

players

have

naive

teller."

receivers

truth teller and

optimally choose (U, D) are called "believers." A senderwho thinks thepopulation of receivers ismade only of believers and thereforeoptimally chooses (m2,m\) is
called a "liar." Last, For the receivers who believe the sender is a liar and therefore

mally choose (D, U) are called "inverters." Notice thatother pairs of behavioral types
could emerge.

opti

would optimally choose (mi,m2), and receiverswho believe the sender does so would optimally choose (<7, ?>), but their strategies are indistinguishable from the firstpair of mortal types (truth tellers,believers). As a result, there is no loss of generality in
focusing our attention on the following pairs of types of sender-receivers:6

example,

sender

who

believes

that receivers

are

all

inverters

truth-teller (rai,ra2) believer (U,D) liar (ni2,m\) inverter (D,U)


Let xt, xi, and xs denote the probability a sender is, respectively, a truth teller, share a of

believers, inverters,and sophisticated types. Sophisticated players are rational in the


standard sense, and their behavior comes

liar, or a sophisticated

type. Similarly,

y^, yz, and ys denote from equilibrium

the population's

considerations,

the structureof the game (payoffs, strategy,and uncertainty about types) is common knowledge (among sophisticated players). To understand how sophisticated players will behave in equilibrium, we need the following two intermediate results: Lemma 1. Letting w; be the probability that the sophisticated sender sends mes sage mi in state S?, then a sophisticated receiver's best response is given by (U,D) (D,U) ifxs(l+wi -w2)>l-2xt, ifxs{\+ wi - w2) < 1- 2xt.

given

that

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

673

Proof. A sophisticated receiver will choose the action maximizing his or her expected payoff. Upon observing message m\, the probability of being in state S] and S2 is proportional to, respectively, p(xt + w\xs) and (1 ?p)(x\ + W2XS). There
fore, since ph?\? p, U is optimal under m\ if Xt+ W\Xs >X\ +w2xs, that is, if a;v(1 + w\ ? w2) > ? 1 2xt.

Similarly, upon observing message m2, the probability of being in state S\ and S2 ? is proportional to, respectively, p(xt + (1 w\)xs) and (1 ? p)(x\ + (1 ? W2)xs). Therefore, U is optimal under m2 if
Xi+(\-W\ ? that is, if 1 )xs > xt + (1 w2)xs, ? w2)xs.

2xt >

(1 + w\

Observe that the only pure strategybest responses for the sophisticated receiver are (U, D) or (D, U). Therefore, let ? denote the probability of the sophisticated recei ver playing (?/,D) and 1? ? theprobability of playing (D, U). Lemma 2. The sophisticated sender's best response to (0, ?, 1? ?, 0) is given by (mi,m2)
(m2,mi)

< if ?jy,
if $ys>

2
-

~yb
-yh

Proof. The sophisticated sender knows that (U, D) will be played by a share ? + (1 ?)v?). + fys) of thepopulation, whereas (D, U) will be played by a share (y? (yb
Thus, in state S\, message m\ is best if

+ >'/, while m2 is best if

?>'v<^<^-

+ (l-?)Xv,

(3)

yi+ (l-P)ys<
Last, indifference between m\ and m2

-<yb + Vys- (4)


whenever neither equation 3 nor

is obtained

equation 4 hold. Now observe that ^ + ?*+:y/ + (l-?)*


In state S2, message m? is best whenever

= l;
is best.

Therefore, the only possible configurations are (mi, m2) and (m2,mj), and the former is optimal whenever

in state S\m_?

while the latter is optimal whenever the opposite holds.

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674

Journal of Conflict Resolution

We

are now

tial equilibria of the game between sophisticated players. The following proposition
covers all

in the position

to characterize

the play the

in the pure >

strategy

sequen

which is tackled in proposition 3. Proposition


sender and

parameters'

configurations

except

case

1/2

max{x?,

jt/, yb, y,},

2. In the sequential equilibria of the game between sophisticated


pure strategies (U,D)} (U,D)\ (D, U)} are as follows: if and only if and only if and only if and only if y? > if y? < if yb < if yb > and x? < andxr > and x? > and xt < -. -. -. -.

receivers, EQ EQ EQ EQ

1 : [(m\,m2), 2 3 4 : : : [(m2,m\), [(m\,m2),

[(m2,m\ ), (D, U)\

Furthermore, the outcome preferred by the sophisticated sender is achieved in all those equilibria.7 Proof. The proof uses Lemma 1 and Lemma 2 above. For example, for [(mi, which m2), (?/, D)] to be an equilibrium means (mi, m2) is best given ?=l, = < > that is and that is best 1,w2 = 0, y? (?/,D) requires ys given w\ 1/2, 1/2 y&, < cases are same > that is The other done in the x/ \?2xu way. implying 2x5 1/2. Proposition 2 shows that the (sophisticated) sender can take advantage of the
uncertainty, whether it is about the receivers or about himself or herself. Whenever

the population share of one mortal type of receiver is larger than 1/2 (equations 1 most preferred outcome by fool and 4), the sophisticated sender can just induce the are acting optimally, they the the receivers ing majority. Although sophisticated
cannot affect the outcome because they represent a minority of the voters.

On the other hand, when sophisticated receivers count (equations 2 and 3), and there is a probability of at least 1/2 that the sender is a mortal type, the sophisticated sendermimics the strategyof the least likelymortal and fools the sophisticated recei vers. Here, the majority of the receivers are acting optimally, since theprobability of a Yet, the outcome induced is still the facing sophisticated sender is smaller than 1/2. most preferredby the sophisticated sender.Last, observe that,from thepoint of view of a mortal sender, the outcome favors a liar only in Equations 2 and 4, while it favors the truthteller inEquations 1 and 3.
It remains to consider the case where

is inmixed strategy,as a quick glance at the best response functions suggests. The result is as follows: > mixed strategies sequen Proposition 3. Assume 1/2 maxj^, x?, y?,yb}. In the tial equilibria, sophisticated senders need to make sure that no transmission of

1/2

>

max{x,,

jc/,yb, y,-}. The

equilibrium

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

675

information that induces

occurs an

(i.e., electoral

= oc2

^j^1 outcome

0C3), and that does

the not

receivers depend

choose

any

strategy (i.e.,

*(?i ^(?i

+ ?2) > V2 -yb> y s (?2 + ?4)> or ys (?i + ?2) < = + ?2)=V2-^ v,(?2 + ?4)).

1/2

on

yb< ys (?2 + ?4), or

the message

Proof Inspection of the best response functions depicted in Figures 2 and 3 shows that,when sophisticated players are pivotal, the equilibrium has to be in mixed strategies. Therefore, the probabilities about the state of nature have to be left unchanged by the message, for otherwise nonequilibrium behavior would
result. Note that

~
? Tft

+ _p[x, (ai +0C2K]_ + + + (1 -p)[xi + (<xi p[xt (cLi cl2)xs] +oc3)x,]' + p[x? fa + U4)XS] ' + a4)xj + (1 - p) [xt + (a2+ a4)xj p[xi+ (oc3
if and only if xt + U2XS = x\+ oc3x5.

As

a result,

= |i

r|

For the sophisticated receivers, itmust be that the electoral outcome does not depend on themessage observed (otherwise, the sender would have a profitable deviation), which means that the share of the population choosing U must exceed, fall short,or equal 1/2, irrespective of themessage. Thus, we need one of the fol
lowing cases:

^+*(?i which is equivalent to

+ ?2) > ? andy/+yJ(?,+?3) < z <

> -,
z

> *(?i + ?2) <

l/2-^<^(?2 >

+ ?4).

Observe that in equilibrium, the sophisticated receivers need tomix in a way that (if the electoral outcome is tobe U), they mostly add to thebelievers when m 1 (so thatys when m2 (so that ys (?2 + ?4) + yb< 1/2). (?i + ?2) + yb > 1/2) and to the inverters In fact, this equilibrium resembles the one under full rationality (see proposition 1). First, when the shares (probabilities) of mortal players are equal, the two equilibria coincide. This is because the twomortal typesperfectlyoffset each other. Second, the equilibrium under full rationalityis the limitof theequilibrium with mortal and sophis
ticated

In general, the equilibria change continuously with respect to the composition of = 1) Suppose, for example, that the sender is (known to be) sophisticated (i.e., xs a and plays against population of mortal and sophisticated receivers. The equili
brium the players' population. Thus, our analysis can be carried forward to polar cases.

players,

when

the share of the latter goes

to 1.

stitutes a majority, the sender plays the strategy that fools this type while

play

depends

on

the share

of mortal

receivers.

When

either mortal

type con

the

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676

Journal of Conflict Resolution

Best Responses

Figure 2 to Pure Strategies for the Sophisticated

Sender

y*=i

y.=i

tf=1

sophisticated receivers will play like the other type (see equations 1 and 4 in propo
sition 2). If, on down the other to oc2= hand, the sophisticated receivers are in majority, to be we

are

with themixed strategyequilibria of proposition 3 inwhich the sender's strate left plifies the strategic interaction. The introduction of behavioral types causes the appearance of pure strategy are rational, inwhich the equilibria that do not exist when all players considered
outcome framework favors the (sophisticated) the happenings views sender. We can see how our analysis offers to a simpli a to evaluate of 2004 U.S. elections according gies boil 0C3. So assuming a sender who is known rational sim

fied model of the game that actually took place between OBL
voters. Depending on one's on the nature of OBL's

and theAmerican
various dif

ferent conclusions can be drawn. For example, ifwe think thatOBL was not only capable of mastering the game but also perfectly knowledgeable about American politics (in other words, ifwe believe OBL was very likely to be fully rational), thenwe can regard the final comment inKrauthammer (2004) thatOBL played against himself throughhis message as unrealistic. Indeed, even without attaching (very likely) sophisticated sender entail the deception of a majority ofmortal recei vers, either believers (in which case OBL was lying) or inverters (in which case
any specific interpretation to states and actions, the pure-strategy equilibria with a

rationality,

OBL was telling the truth).

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

677

Best Responses xf=1

Figure 3 to Pure Strategies for the Sophisticated Receiver

1 2

On the other hand, ifone believes that, likeKrauthammer (2004) suggests, OBL was naive about American politics, thenwe should look at the equilibria inwhich the sender is most likely a liar or a truth teller: Under those circumstances, the
sophisticated fooled by American the message, voters whatever would have avoided their mortal counterparts to be the true state of the world.

So far, our model depicts the case inwhich the interaction between sender and
receivers is clear cut, with As a

of examples, beside OBL's


our base layer and model permits. are of uncertainty the sender's scenarios

2004 message,
we point out that voters they framed are

perfect

negative

inwhich things are more nuanced than


in the may introduction, not know partially) model than there whether the same.8 the above. can be an extra their Less interests black

payoff

correlation.

Yet,

one

can

think

in the sense at odds need or

and-white

to be

(perhaps in a wider

Therefore,

in the next section, we extend the base model


tainty about the correlation between sender's and

to explore the possibility of uncer


receivers' payoffs.

A Model withUncertainty about theSender's Interests


In this section, we investigate the case inwhich the sender may have interests
that, under some states of the world, coincide with those of the receivers. Assume,

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678

Journal of Conflict Resolution

Figure 4 the Actions Given (Um and Dm) of theMajority Payoffs of Receivers and the State ofNature (Four States) P1 F2 Un
1,-1

P1
1,1

P1 0,0 1,1

P1

0, S,

0,
1,-1

0,0

be the probability of therefore, that the state space is S = {S\, S2, S3, S 4} and let/?/ M = {m\,m2}, and a strategy for the sender is a state Si. The message space is still function from S to M.9 Receivers choose an action, aeA = {U,D}, and a strategy M toA. Notations for pure and mixed strategies for the receivers is a function from
follow pure the logic strategy of the previous the sender's section. message For example, (m\, m\, m2, m2) S\ and S2 denotes the where is mi in states and m2 in states

message is S3 and S4. In turn, (U, D) means that the receiver chooses action U if denote the posterior belief about mi, and action D if message ism2. Last, let^(r^) state Si when signal mi (m2) is observed. Remember that these probabilities depend on pi and on the strategy adopted by the sender and are computed by Bayes' rule
whenever Players' possible. payoffs as a function of the states and of the receivers' actions are

reported inFigure 4. Compared to the previous model, we have added complexity to the payoffs
structure, but we have restricted attention to the case where both alternatives

the same payoff to both players. In what follows, we assume that


P\ +P2=P3+P4,

give

(5)
further that either one of the follow

meaning there is ex ante indifferencebetween the two candidates, which we adopt


as our metric for a close election. We suppose

ing two inequalities hold


P2+P3 P2+P3 > P\ +P4, <P\ +/?4

(6) (7)

Inequality 6 means that the sender ismore likely to have positively correlated pay offs with the receivers (we call him a "friend"), whereas inequality 7 means the sender ismore likely to have negatively correlated payoffs with the receivers (we call him an "enemy"). Moreover, note that inequalities 5 and 6 imply thatP3> p\ whereas inequalities 5 and 7 imply thatP3 < p\ and P2< Pa and p2 > /?4,

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

679

This model
sender Given

is similar to Sobel
or an enemy, of M and

(1985), for there is uncertainty on whether the


as on which action is best can for the receiver. posterior prob for the sender induce

is a friend

as well

the nature

abilities on S thatgenerate one of the following partitions of S: P? = {S} P2 = {{Si,Sh},{Sj,Sk}}.


P? where two other to totally uninformative messages. corresponds one state, Si, is revealed 1. P2 with probability states, S? and S/?, are because separated there are four from the other but only states Pl corresponds and

S, a strategy

to messages where cannot Equili be There

corresponds two,

to messages

bria can be usefully distinguished in terms of the partitions they generate over the state space. To this end, we give the following definition: Definition 1. An equilibrium is said to be pooling if it induces P? and partially revealing if it induces Pl or P2. To begin with, consider the benchmark case of perfect rationality. Like in the base model, there are pooling sequential equilibria, inwhich the posterior beliefs
are

partitions

S?. Sj two possible messages.

come thatdoes not depend on the signal received. Additionally, there cannot exist partially revealing equilibria that induce Pl. Sup
pose, egy for example, that there were When such an equilibrium observe where m\, the sender's pure strat is (mi, ra2, m2, mi). the receivers they know that the true state

equal

to the priors,

and

receivers

choose

a strategy

that induces

an electoral

out

is S\.Moreover, when m2 is sent, theyknow thatS2 is less likely to be the true state than S3 or S4, so theirbest response is (U, D). We now can see why the initial pro posed strategy for the sender cannot be an equilibrium strategy:He or she would
rather send m\ in state S4. In a similar vein, we can see

typePl cannot be part of a pure strategysequential equilibrium. Finally, a partially revealing equilibrium that induces Pl exists only when the states are partitioned into {Si, S3} and {S2, S4}, and the sender is a friend (i.e., con
dition

why

any other

partition

of the

best response is to choose (D, U) when the sender is a friend, and (U, D) when the
sender is an

6 holds).

In fact, In

suppose

the sender

chooses

(mi,

wi2, m\, m2). not want

The

receivers'

his or her proposed strategy,whereas


(jTi2, mi, m2, mi). One can also easily

enemy.

the former

case,

the

sender

does

to deviate

from

in the latter, the sender would


verify that all the other possible

rather pick
partitions of

states inP2 cannot be supported as an equilibrium: Given the priors on these states, any strategy inducing P2 implies that it is optimal for the receivers to adopt either ([/,D) or (D, U). The only case inwhich the sender does not want to deviate is the
one shown above.

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680

Journal of Conflict Resolution

This result parallels theorem 1 in Sobel (1995), which states that if the probabil ity of the sender being a friend is larger than 1/2, then there is an equilibrium in which themost preferred action for the sender is revealed with probability 1. Summing up, we have the following: Proposition
messages which

4. Under full rationality, besides


informative and receivers do not

the pooling equilibria


condition their action on

in which
the sig

are not

nal, there are partially revealing sequential equilibria, when condition 6 holds, in
pure strategies are as follows: 1 :[(ml,m2,m],m2),(D,U)}, 2 :[(m2,ml,m2,m{),(U,D)}.

EQ EQ

These results show thatwhen condition 6 holds, a selection issue among multiple
(pure about We about

meaning and signals are valued only for the information language has no intrinsic
the states now their of the world to the case they convey. in which as players in the have the same type of uncertainty and distinguish turn

strategies)

equilibria

arise.

This

is common

in communication

games,

since

between the two polar cases described by inequalities 6 and 7. The Sender
This case

opponent's

rationality

previous

section,

is an Enemy
entails P4>pi and which p\ > P3. the By states iterating Consider again where best a baseline type to a truth-telling sender we prefers obtain of a sender in the the

(mi, m2, mi, m2), choosing sense that the strategy separates states where

corresponds

type, U

the

from

ing pairs of types:

he or she prefers

D.

responses,

the follow

truth-teller liar

(m\,m2,m\,m2) (m2,m\,m2,m\) of is as sender's

believer inverter

{U,D) (D,U) and and shares of

The

notation

about

probabilities ys)

types

(xt, x?, section.

xs)

receivers'

To characterize the behavior of the sophisticated players, letw? denote the prob ability that the sophisticated sender sends message m\ in state S? while ? is the probability a sophisticated receiver chooses (U, D). Then, Lemma 3. The best response for a sophisticated receiver is given by (U,D) (D,U) > (Xt if (xt + W2Xs)p2 + W]Xs)pi+ (x? + H'3Xy)p3 + (x? + W4Xs)p4, if (xt + w2xs)p2< {xt + WjXs)pi+ (Xj + W3Xs)pi + (Xi + W4Xs)p4.

types

(yb, yz, and

in the previous

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

681

The best response for a sophisticated sender is given by


(mum2,mi,m2) if $ys+yb< if f>ys+yb> ~z, -.

(m2,mum2,mi)

Proof. A sophisticated receiver will choose the action maximizing expected payoff. The posterior probability of being in state S, induced by message mi is pro e {2,4}; similarly, the G {1,3} and to (x? + W{Xs)pi if / + WiXs)pi if / portional to (xt state S, having observed message m2 is proportional to probability of being in ? e {2,4}. Using these G {1,3} and to xt+ (1 ? Wi)xs)p? if / X[+ (1 Wi)xs)pi if / to is + w\xs)p\ + optimal if (xt probabilities, it is straightforward verify that (?/,D) > while + wixs)p3 + (xi+ w4x5)p4 (?>, U) is optimal if the oppo (xt (x] + W2XS) p2 site inequality holds. Therefore, in equilibrium, the receiver will only play either (?7,D) or (D, ?7).As for the sender, the fractionof those expected to play (U, D) will ? fall behind thatof those expected to play (?>, U) if (yb + ?y5) < (yi+ (1 ?)yj; that
is when

is (m2,mi, m2, mi) when theopposite inequality holds. The following proposition characterizes the pure strategy sequential Nash equi libria of the game: Proposition 5. Suppose conditions 5 and 7 hold. Then in the sequential equili
bria of the game between sophisticated sender and receivers, pure strategies are as

+y?, ?_y5

<

1/2:

In such

case,

(mj, m2, mi,

m2)

is the best

strategy, whereas

it

follows:
1: [(m\,m2,m\,m2), 2: 3: 4: l(m],m2,m\,m2), l(m2,m\,m2,m\), if and only if and only if and only if and only if y? > if yh < if y? < if yh > and x? < and x? > and xt> and xt < -. -. -. .

EQ EQ EQ EQ

(U,D)] (D, U)] (U,D)}

[(m2,m\,m2,m.\),(D,U)]

Furthermore, the electoral outcome


achieved in all those equilibria, whatever

preferred by the sophisticated sender is


the state.

with the equilibria in the two states case of the previous Note the high similarity
section. There is a difference,

anytime the outcome preferredby the sender is implemented. In particular, in states S2 and S3, letting the sophisticated sender determine the outcome helps the receivers as well. This is due to the fact that in those states the interestsof the players are the
same.

though:

It is not

true anymore

that the receivers

lose

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682

Journal of Conflict Resolution

Let 1/2 = \i? >

us

now

turn

to the

equilibria

in mixed message that

the X], yb, y,-}. For max{if, for all i. This condition r\i ?pi

sender's requires xi-xt

strategies, to be

which

arise

whenever we need

uninformative,

W\ =-h

W4 Xs = W?, H;3 =W\, W4 on sender's strategies found in proposi

which

tion 3.10 Observe that the problem for the receivers is the same as before: They mix so that the electoral outcome is not affected by the public need to find the right signal. Therefore, theirequilibrium strategy is the same as in proposition 3. The role of the sophisticated players in themixed strategies equilibrium is ana logous to the previous model: They need to put more probability on choosing the action that is consistent with themortal typewhose probability is smaller. Like in the base model, if the sender is known to be sophisticated, then the structure of the equilibria depends on the relative size of themortal receivers. In fact, if either of them is large enough to constitute a majority, the partially revealing pure strat egy equilibria of EQ 1 and EQ 4 in proposition 5 apply. Otherwise, if none is large enough so that the sophisticated players are pivotal, thenwe have the pool ing equilibria.
Therefore, we between can conclude sender and that the introduction receiver does not of uncertainty alter the main about result correlation of the base in payoffs

corresponds

closely

to the condition

model
now

if there is at least a 50 percent chance that the sender is indeed an enemy.We


case?that is, when the sender is more likely to be a friend.

turn to the opposite

The Sender

is a Friend

> P4 and 773 The sender is a friendwhen condition 6 holds and therefore/?2 >p\.
If we assume

best responses generates the following pair of players' types:


truth-teller : (m\,m2, m 1, m2) believer (D,U)

again

that the most

naive

sender

adopts

(mi, m2, mi,

m2),

iteration

of

In this case, believers play (D, U) instead of (U, D) as in the rest of the article. This is because themost likely states are S2 and S3 inwhich choosing, respectively, U mortal liars and invertersdo not fit in the scene: This and D is best. Also notice that
is because,

response to a believer type is now telling the truth. Having a simpler structureofmortal types, the conditions describing the sophis ticated players' best responses simplify accordingly: Lemma 4. Let conditions 5 and 6 hold. The sophisticated receiver's best

maintaining

the same

naive

type

as

in the rest of

the article,

the best

response is given by

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

683

(U,D) (D, U)

if (xt+ w{xs)pi if (xt+ w\xs)pi

+ w2xsp2 > + w2x5/?2 <

{xt+ w3xs)p3 (xt+ w3xs)p3

+ wAxspA, + w4x,p4.

The sophisticated sender's best responses are given by


(m\,m2,m\,m2) if ?y, < -,

(m2,mi,m2,mi)

if ?y5 >

-.

The proof is analogous to that of Lemma 3 and is therefore omitted. It is now straightforwardto characterize the equilibrium play in the pure strategy sequential equilibria. Proposition 6. Let conditions 5 and 6 hold. Then in the sequential equilibria of the
game between the sophisticated EQ EQ sender and receivers, pure strategies are given by

1 :[(m\,m2,mi,m2), 2 :{(m2,m\,m2,m\),

(D, U)] {U,D)}

for any parameters' if - > max{xt,y?,}.

value.

The electoral outcome most favorable to the sophisticated sender is achieved in all
those

Remark thatEQ 2 is an equilibrium in which mortal receivers are fooled, but this does not produce any harm since there is a majority of sophisticated receivers. Conversely, with EQ 1, the vote results in unanimity. In both equilibria, however,
the outcome is the most

equilibria,

whatever

the state.

> max {.*:,, Similar to the enemy case, when 1/2 yb}, there are (mixed strategies)
pooling

preferred

by

the sender

in every

state.

dition theiraction on the signal. Unlike the enemy case, note that the set of equilibria does not expand when beha vioral types are introduced; rather, itbecomes reduced, provided that the amount of having less sophistication is good in the sense that iteliminates the pooling equilibria inwhich thepositive correlation in theplayers' payoffs is not exploited. Conclusion
sophisticated receivers is not too large. As a consequence, and perhaps surprisingly,

equilibria

in which

messages

are not

informative

and

receivers

do not con

We have analyzed a model with a sender interacting with a population of receivers. The sender has informationthat is relevant for the payoffs of both kinds of players. Receivers take a binary choice, and thefinal outcome is determined by majority rule.

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684

Journal of Conflict Resolution

In addition, there is uncertainty, similar to Crawford (2003), about the sophistication of both sender and receivers.We find that the pure strategyequilibria of the game share theproperty that if the sender is sophisticated, the outcome will be favorable for
him when or her, whatever there are states the prevailing in which state. This result also the interests of the sender carries in the case through are not at odds with those of

the receivers.

lic on the eve of the 2004 U.S. presidential elections can help in tryingto rationalize a seemingly paradoxical event inwhich, according to some views, OBL "pulled his nemesis over the finish line" (Krauthammer 2004). Although we refrain from offer
on the matter, the reader can perhaps fill in the empty usefully the rationality of the various actors to see who won and regarding to our model. who lost according The voters the conflicting models interests between U.S. game we investigated ing personal views parameters slots our

Using

this framework

to analyze

OBL's

videotape

message

to the American

pub

and OBL in a simplifiedway alongside a hidden true motivation for themessage on OBL's part.A possible alternative (and equally interesting)description of what hap OBL's ultimate intended audience was not pened can be devised ifone believes that not (or only) theAmerican public but, for example, (radical) groups within the Isla mic communities worldwide.11 In that case, Farrell and Gibbons's (1989) model of cheap talkwith two audiences would be the natural startingpoint for the analysis, which can be the object of further research on the topic. Notes
1.The defeated candidate himself later ascribed a decisive importance to the videotape for the out come of the presidential race. Quoting fromNagourney (2005) "the attacks of Sept. 11were the "central deciding thing" in his contest with President Bush and that the release of an Osama bin Laden videotape theweekend 2. Another

historic defeat in the general elections 3 days after. Unlike OBL's message, it is not a case of a third party's endorsement. Yet, the events were so close to the elections and novel to call, again, for a model with initial responses. 3. This approach can be used for sports, where data can be (and in fact are) gathered (see, e.g., 2003; Walker andWooders 2001). Chiappori, Levitt, and Groseclose 2002; Palacios-Huerta 4. On the other hand, it is true thatworking under a more general assumption, such as pb > 1? p, generates a change in the structure of the equilibria. Yet, themain structure of the article remains unaf fected, since only the equilibria where the sophisticated receivers mix no longer exist. 5. If the population of voters were large but finite, looking at undominated strategies would do. With a continuum of voters the payoff irrelevance of voters' actions can be overcome by the notion of atom proofness as introduced byMeirowitz 6. The characterization of behavioral (2005). types depends on the definition of the level 0 players. In the and Colucci (2008), we show that themain results hold under a variety

before Election Day had effectively erased any hope he had of victory." episode that fits well this picture is the strategy adopted by Jos? Maria Aznar (and voters' response in the polls) following the 2004 Madrid train bombings that eventually brought him to a

working paper version of Landi of different but plausible definitions of level 0 types.

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Landi, Colucci

/Binary Choice

Sender-Receiver

Game

685

7. We equalities. 8. The picture. 9. We

restrict our attention to generic values

of the parameters

and therefore do not consider

the Economist's in 2006 presidential elections inMexico, front pages examples of Marcos on Berlusconi, and Aznar's message right after theMadrid bombings seem to fit in this more general maintain the assumption of a binary message space because of the kind of application we have inmind, inwhich themessage clearly signals either one of two possible candidates in an election. 10. This condition is presented in terms of behavioral strategies Myerson (1991) rather than standard mixed strategies as in the previous section. Reasons of simplicity motivate this choice because mixed strategies for the sender are vectors in the fifteen-dimensional simplex. We are reluctant to use the expli cit wording

about behavioral strategies because of the possible confusion with the term behavioral types thatwe have used extensively in the present article. 11. This seems indeed to be the case for various more recent video or audio messages attributed to bin Laden.

Osama

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