DP16831 Communication in the shadow of catastrophe

• Inga Deimen Dezső Szalay
24 Dec 2021

We study the role of risk in strategic information transmission. We show that an increased likelihood of extreme states – heavier tails – decreases the amount of information transmission and makes it optimal to alter the mode of decision-making from communication to simple delegation. Moreover, the worst-case losses under communication increase relative to the worst-case losses under delegation when the tails get heavier.