SMU SOE Seminar Series (April 23, 2026): A Macroeconomic Model with Bond Market Liquidity

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ABSTRACT

We study sender-receiver games of verifiable disclosure in which the sender's evidence is a noisy signal of her private information. Our paper explores a tradeoff created by verifiability. By disciplining the sender’s claims, verifiability makes her more credible, which can improve her ability to transmit information. At the same time, by restricting how flexibly she can use language, it can impede her ability to communicate her private information. We show that unraveling is sustainable in equilibrium if and only if the sender’s bias is sufficiently large. When preferences are more aligned, equilibria exist in which the sender uses silence in a flexible, type-dependent way to transmit more information than is contained in the verifiable evidence she possesses. Comparing verifiable disclosure with cheap talk, we show that flexibility is more valuable under greater alignment, whereas credibility is more valuable under greater misalignment. We also show that more informative evidence need not improve equilibrium communication, and that even uninformative evidence can sustain disclosure outcomes more informative than cheap talk.