We analyze a model of trading under incomplete information similar to Chakraborty and Yilmaz (2004a, 2004b). We show that the possible presence of an informed insider in the market with long-lived private information generates an incentive for the insider to bluff or manipulate, i.e., undertake unprofitable trades early on in order to undertake profitable future trades at more favorable prices. In contrast to previous work, where the insider bluffs in order to add noise to the market’s problem of inferring the fundamentals from the observed order flow, in the present paper the insider has an added incentive to manipulate. This arises from the presence of a large number of competitive rational traders who hold coarser information than the insider but finer information than the market maker, making it in their interest to “follow ” the insider’s trades in equilibrium.

Management-aligned boards exchange precise information with management and make efficient decisions. But when agency conflicts are important, management-aligned boards may not maximize shareholder value. Even if management controls all decisions and the board only provides advice, optimal boards may withhold information. This creates inefficiencies. But agency costs fall because management is induced to obey the board. When the board can directly veto management proposals, shareholders are better off. Optimal boards should then be more shareholder-aligned. Shareholder value is further enhanced if shareholders can veto management and also commit to revealing the board’s information. Optimal boards should then be perfectly shareholder-aligned. Received September 26, 2015; editorial decision December 18, 2016 by Editor Andrew Karolyi.

We consider the credibility, persuasiveness, and informativeness of multidimensional cheap talk by an expert to a decision maker. We find that an expert with state-independent preferences can always make credible comparative statements that trade off the expert's incentive to exaggerate on each dimension. Such communication benefits the expert—cheap talk is “persuasive”—if her preferences are quasiconvex. Communication benefits a decision maker by allowing for a more informed decision, but strategic interactions between multiple decision makers can reverse this gain. We apply these results to topics including product recommendations, voting, auction disclosure, and advertising.

Two players with common interests exchange information to make a decision. But they fear scrutiny. Their unencrypted communications will be observed by another agent with different interests who can object to their decision. We show how the players can implement their ideal decision rule using a back-and-forth conversation. Such a subversive conversation reveals enough information for the players to determine their best decision but not enough information for the observer to determine whether the decision was against his interest. Our results show how conversations can maintain deniability even in the face of leaks, hacks, and other public exposures.