Advanced Search
MyIDEAS: Login

Valuable cheap talk and equilibrium selection

Contents:

Author Info

  • Julian C. Jamison
Registered author(s):

    Abstract

    Intuitively, we expect that players who are allowed to engage in costless communication before playing a game would be foolish to agree on an inefficient equilibrium. At the same time, however, such preplay communication has been suggested as a rationale for expecting Nash equilibrium in general. This paper presents a plausible formal model of cheap talk that distinguishes and resolves these possibilities. Players are assumed to have an unlimited opportunity to send messages before playing an arbitrary game. Using an extension of fictitious play beliefs, minimal assumptions are made concerning which messages about future actions are credible and hence contribute to final beliefs. In this environment it is shown that meaningful communication among players leads to a Nash equilibrium (NE) of the action game. Within the set of NE, efficiency then turns out to be a consequence of imposing optimality on the cheap talk portion of the extended game. This finding contrasts with previous "babbling" results.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bostonfed.org/economic/wp/wp2012/wp1203.htm
    Download Restriction: no

    File URL: http://www.bostonfed.org/economic/wp/wp2012/wp1203.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 12-3.

    as in new window
    Length:
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:fip:fedbwp:12-3

    Contact details of provider:
    Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210
    Phone: 617-973-3397
    Fax: 617-973-4221
    Email:
    Web page: http://www.bos.frb.org/
    More information through EDIRC

    Order Information:
    Email:

    Related research

    Keywords: Game theory ; Stochastic analysis;

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. James Bergin & Bentley MacLeod, 1989. "Efficiency and Renegotiation in Repeated Games," Working Papers 752, Queen's University, Department of Economics.
    2. Joseph Farrell, 1987. "Cheap Talk, Coordination, and Entry," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 34-39, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fip:fedbwp:12-3. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.