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Cheap Talk

  • Joseph Farrell
  • Matthew Rabin

Economists often ask how private information is shared through markets, costly signaling, and other mechanisms. Yet most information sharing is done through ordinary, informal talk. Economists are inconsistent in their view of such 'cheap talk': sometimes it is supposed that communication generally leads to efficient equilibria; other times it is supposed that since 'talk is cheap,' it is never credible. The authors think both views are wrong. In this paper, they describe what some recent research in game theory teaches about when people will convey private information by cheap talk.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.10.3.103
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 10 (1996)
Issue (Month): 3 (Summer)
Pages: 103-118

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Handle: RePEc:aea:jecper:v:10:y:1996:i:3:p:103-18
Note: DOI: 10.1257/jep.10.3.103
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  1. Matthew Rabin., 1991. "A Model of Pre-Game Communication," Economics Working Papers 91-164, University of California at Berkeley.
  2. Barry Sopher & Inigo Zapater, 1998. "Communication and Coordination in Signalling Games: An Experimental Study," Departmental Working Papers 199803, Rutgers University, Department of Economics.
  3. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  4. Joseph Farrell., 1986. "Meaning and Credibility in Cheap-Talk Games," Economics Working Papers 8609, University of California at Berkeley.
  5. Joseph Farrell, 1987. "Cheap Talk, Coordination, and Entry," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 34-39, Spring.
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