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Cheap Talk and Burned Money

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  • David Austen-Smith
  • Jeffrey S. Banks

Abstract

We augment the standard Crawford-Sobel (Econometrica 1982) model of cheap talk communication by allowing the informed party to use both costless and costly messages. The issues on which we focus are the consequences for cheap talk signaling of the option to use a costly signal ("burned money"); the circumstances under which both cheap talk and burned money are used to signal information; and the extent to which burning money is the preferred instrument for information transmission.

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File URL: http://www.kellogg.northwestern.edu/research/math/papers/1245.pdf
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Bibliographic Info

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1245.

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Date of creation: Nov 1998
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Handle: RePEc:nwu:cmsems:1245

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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
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Web page: http://www.kellogg.northwestern.edu/research/math/
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  1. Joseph Farrell., 1986. "Meaning and Credibility in Cheap-Talk Games," Economics Working Papers 8609, University of California at Berkeley.
  2. Joseph Farrell and Robert Gibbons., 1988. "Cheap Talk Can Matter in Bargaining," Economics Working Papers 8863, University of California at Berkeley.
  3. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  4. M. Rabin, 2010. "Communication Between Rational Agents," Levine's Working Paper Archive 539, David K. Levine.
  5. Blume Andreas & Kim Yong-Gwan & Sobel Joel, 1993. "Evolutionary Stability in Games of Communication," Games and Economic Behavior, Elsevier, vol. 5(4), pages 547-575, October.
  6. Matthews, Steven A. & Okuno-Fujiwara, Masahiro & Postlewaite, Andrew, 1991. "Refining cheap-talk equilibria," Journal of Economic Theory, Elsevier, vol. 55(2), pages 247-273, December.
  7. Blume, A., 1992. "Equilibrium Refinements in Sender-Receiver Games," Working Papers 92-12, University of Iowa, Department of Economics.
  8. Gilligan, Thomas W & Krehbiel, Keith, 1987. "Collective Decisionmaking and Standing Committees: An Informational Rationale for Restrictive Amendment Procedures," Journal of Law, Economics and Organization, Oxford University Press, vol. 3(2), pages 287-335, Fall.
  9. Joseph E. Harrington, 1992. "The Revelation Of Information Through The Electoral Process: An Exploratory Analysis," Economics and Politics, Wiley Blackwell, vol. 4(3), pages 255-276, November.
  10. Damme, E.E.C. van, 1989. "Stable equilibria and forward induction," Open Access publications from Tilburg University urn:nbn:nl:ui:12-154422, Tilburg University.
  11. Austen-Smith David, 1993. "Interested Experts and Policy Advice: Multiple Referrals under Open Rule," Games and Economic Behavior, Elsevier, vol. 5(1), pages 3-43, January.
  12. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap Talk with Two Audiences," American Economic Review, American Economic Association, vol. 79(5), pages 1214-23, December.
  13. van Damme,Eric, 1987. "Stable equilibria and forward induction," Discussion Paper Serie A 128, University of Bonn, Germany.
  14. repec:fth:stanho:e-89-7 is not listed on IDEAS
  15. Matthews, Steven A, 1989. "Veto Threats: Rhetoric in a Bargaining Game," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 347-69, May.
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