AbstractNatural language is a shared social convention that allows hearers to understand speakers. We model this using two steps. First, an encoding-decoding step where the sender transmits verbal information to the receiver. Second, an inferential step where the receiver may either believe the literal meaning of the message or disregard it in updating priors. These epistemic steps sharply restrict the beliefs that may be entertained on and off the equilibrium path. When there are credible messages, natural language is a powerful means to select equilibria.
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Bibliographic InfoPaper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 443.
Length: 41 pages
Date of creation: Feb 2011
Date of revision: Nov 2011
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More information through EDIRC
cheap talk; signs; linguistic symbols; literal meaning; equilibrium meaning;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-12 (All new papers)
- NEP-EVO-2011-03-12 (Evolutionary Economics)
- NEP-GTH-2011-03-12 (Game Theory)
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