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The result of world powers in WTO: A cheap-talk game under different communication protocols

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  • Wang, Yun
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    Abstract

    Official reports and case studies reveal that China experienced different means of communication with the world powers since it joined the World Trade Organization in 2001. In the first five years, China had public communication with both the United States and the European Union under the Transitional Review Mechanism. In 2006 a new means of communication, the China–US Strategic and Economic Dialogue, started to take effect. Reports show that the new mechanism has advanced the China–US relationship positively and productively. The difference between the two means of communication stimulates our study. We adopt a game theory model to examine the impact of different communication protocols on China's incentives to reveal information. We analyze a cheap-talk game between an informed agent and two uninformed principals who coordinate actions under two communication protocols: public and private communication. First, all equilibria under both means of communication are characterized. Information precision of the agent's equilibrium messages decreases with the principals' preference biases. Second, under private communication the agent communicates more informatively with one principal if she in effect reveals little information to the other. Under private communication there exists an informative equilibrium with asymmetric levels of information precision even when all equilibria under public communication are uninformative.

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    Bibliographic Info

    Article provided by Elsevier in its journal China Economic Review.

    Volume (Year): 27 (2013)
    Issue (Month): C ()
    Pages: 192-207

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    Handle: RePEc:eee:chieco:v:27:y:2013:i:c:p:192-207

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    Web page: http://www.elsevier.com/locate/chieco

    Related research

    Keywords: Strategic information transmission; Tacit coordination; Public communication; Private communication; WTO;

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    1. Jeanne Hagenbach & Frédéric Koessler, 2008. "Strategic communication networks," PSE Working Papers halshs-00586847, HAL.
    2. Stephen Morris & Hyun Song Shin, 2006. "Optimal Communication," Levine's Bibliography 321307000000000236, UCLA Department of Economics.
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    4. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
    5. Frédéric Koessler & David Martimort, 2008. "Multidimensional communication mechanisms: cooperative and conflicting designs," PSE Working Papers halshs-00586854, HAL.
    6. Goltsman, Maria & Pavlov, Gregory, 2011. "How to talk to multiple audiences," Games and Economic Behavior, Elsevier, vol. 72(1), pages 100-122, May.
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    8. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization? Corrigendum," American Economic Review, American Economic Association, vol. 98(3), pages 1195-96, June.
    9. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    10. Koessler, Frédéric, 2008. "Lobbying with two audiences: Public vs private certification," Mathematical Social Sciences, Elsevier, vol. 55(3), pages 305-314, May.
    11. Johns, Leslie, 2007. "A Servant of Two Masters: Communication and the Selection of International Bureaucrats," International Organization, Cambridge University Press, vol. 61(02), pages 245-275, April.
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    13. Alonso, Ricardo & Dessein, Wouter & Matouschek, Niko, 2006. "When Does Coordination Require Centralization?," CEPR Discussion Papers 5802, C.E.P.R. Discussion Papers.
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