Cheap Talk with Two Audiences

These problems have in common a simple structure: an informed "sender" says something to two interested but uninformed "receivers," who then take actions based on their beliefs; these actions affect the sender as well as the receivers. In this paper we study how costless, nonverifiable claims (cheap talk) can affect these beliefs (and hence the actions), and how the incentives for truthful revelation to one receiver are affected by the presence of the other. We then ask how welfare is affected by whether claims are made in public or in private. As some of the above examples suggest, public messages may be more credible than private messages addressed to either audience. One possibility is that the presence of one audience can discipline the sender's relationship with the other; we call this one-sided