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Cheap Talk

Author

Listed:
  • Joseph Farrell
  • Matthew Rabin

Abstract

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.

Suggested Citation

  • Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
  • Handle: RePEc:aea:jecper:v:10:y:1996:i:3:p:103-18
    Note: DOI: 10.1257/jep.10.3.103
    as

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.10.3.103
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    References listed on IDEAS

    as
    1. Rabin Matthew, 1994. "A Model of Pre-game Communication," Journal of Economic Theory, Elsevier, vol. 63(2), pages 370-391, August.
    2. Steven A. Matthews, 1989. "Veto Threats: Rhetoric in a Bargaining Game," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 347-369.
    3. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October.
    4. Farrell, Joseph, 1988. "Communication, coordination and Nash equilibrium," Economics Letters, Elsevier, vol. 27(3), pages 209-214.
    5. Sopher, B. & Zapater, I., 1993. "Communication and Coordination in Signalling Games: An Experimental Study," Working Papers 93-26, C.V. Starr Center for Applied Economics, New York University.
    6. Joseph Farrell, 1987. "Cheap Talk, Coordination, and Entry," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 34-39, Spring.
    7. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • 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

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