Toxic types and infectious communication breakdown

• Authors: Alexander Frug.
• Games and Economic Behavior
• Behavioral and Experimental Economics
• Social Choice and Mechanism Design

We study an environment where an informed sender has conflicting interests with an uninformed receiver only in some states. Using an “infection-like” argument, we show that with symmetric loss functions, the presence of such disagreement states – even if they are very rare – leads to coarse communication in all states, even those where, following communication, it is commonly known that the players’ interests are perfectly aligned. However, with asymmetric loss functions, one can construct examples with truthful communication in some set of states.