Discussion paper

DP16831 Communication in the shadow of catastrophe

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.


Deimen, I and D Szalay (2021), ‘DP16831 Communication in the shadow of catastrophe‘, CEPR Discussion Paper No. 16831. CEPR Press, Paris & London. https://cepr.org/publications/dp16831