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Justified Communication Equilibrium

Author

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  • Daniel Clark
  • Drew Fudenberg

Abstract

Justified communication equilibrium (JCE) is an equilibrium refinement for signaling games with cheap-talk communication. A strategy profile must be a JCE to be a stable outcome of nonequilibrium learning when receivers are initially trusting and senders play many more times than receivers. In the learning model, the counterfactual "speeches" that have been informally used to motivate past refinements are messages that are actually sent. Stable profiles need not be perfect Bayesian equilibria, so JCE sometimes preserves equilibria that existing refinements eliminate. Despite this, it resembles the earlier refinements D1 and NWBR, and it coincides with them in co-monotonic signaling games.

Suggested Citation

  • Daniel Clark & Drew Fudenberg, 2021. "Justified Communication Equilibrium," American Economic Review, American Economic Association, vol. 111(9), pages 3004-3034, September.
    • Handle: RePEc:aea:aecrev:v:111:y:2021:i:9:p:3004-34
    DOI: 10.1257/aer.20201692
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    References listed on IDEAS

    as
    1. Drew Fudenberg & David K. Levine, 2006. "Superstition and Rational Learning," American Economic Review, American Economic Association, vol. 96(3), pages 630-651, June.
    2. Fudenberg, Drew & He, Kevin, 2020. "Payoff information and learning in signaling games," Games and Economic Behavior, Elsevier, vol. 120(C), pages 96-120.
    3. Drew Fudenberg & Kevin He, 2018. "Learning and Type Compatibility in Signaling Games," Econometrica, Econometric Society, vol. 86(4), pages 1215-1255, July.
    4. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 179-221.
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    Cited by:

    1. Clark, Daniel & Fudenberg, Drew & He, Kevin, 2022. "Observability, dominance, and induction in learning models," Journal of Economic Theory, Elsevier, vol. 206(C).
    2. Fudenberg, Drew & He, Kevin, 2021. "Player-compatible learning and player-compatible equilibrium," Journal of Economic Theory, Elsevier, vol. 194(C).
    3. Fudenberg, Drew & Lanzani, Giacomo & Strack, Philipp, 2023. "Pathwise concentration bounds for Bayesian beliefs," Theoretical Economics, Econometric Society, vol. 18(4), November.

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    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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