Strategic communication of narratives

Abstract

We model the communication of narratives as a cheap-talk game under model uncertainty. The sender has private information about the true data generating process of publicly observable data. The receiver is uncertain about how to interpret the data, but aware of the sender's incentives to strategically provide interpretations ("narratives"). We introduce a general class of ambiguity rules resolving the receiver's ignorance of the true data generating process, including maximum likelihood and max-min expected utility. The set of equilibria is characterized by a positive integer $N$: we derive an algorithm which yields an equilibrium that induces $n$ different actions for each $1\leq n \leq N$. We further show that the persuasive power of the sender is weaker in the sense of state-wise dominance than with a na\"ive receiver being unaware of the sender's incentives.