Simple Mediation in a Cheap-Talk Game

Abstract

In the Crawford–Sobel (uniform, quadratic utility) cheap-talk model, we consider a simple mediation scheme (a communication device) in which the informed agent reports one of the N possible elements of a partition to the mediator and then the mediator suggests one of the N actions to the uninformed decision-maker according to the probability distribution of the device. We show that no such simple mediated equilibrium can improve upon the unmediated N-partition Crawford–Sobel equilibrium when the preference divergence parameter (bias) is small.