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Cheap Talk and Burned Money

  • Austen-Smith, David
  • Banks, Jeffrey S.

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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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 91 (2000)
Issue (Month): 1 (March)
Pages: 1-16

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Handle: RePEc:eee:jetheo:v:91:y:2000:i:1:p:1-16
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  1. Blume, A. & Kim, Y.G. & Sobel, J., 1992. "Evolutionary Stability in Games of Communication," Working Papers 92-17, University of Iowa, Department of Economics.
  2. M. Rabin, 2010. "Communication Between Rational Agents," Levine's Working Paper Archive 539, David K. Levine.
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  4. van Damme, E.E.C., 1989. "Stable equilibria and forward induction," Other publications TiSEM bd598a8f-f017-4cab-a9ed-8, Tilburg University, School of Economics and Management.
  5. J. Farrell, 2010. "Meaning and Credibility in Cheap Talk Games," Levine's Working Paper Archive 533, David K. Levine.
  6. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap talk can matter in bargaining," Journal of Economic Theory, Elsevier, vol. 48(1), pages 221-237, June.
  7. 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.
  8. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  9. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap Talk with Two Audiences," American Economic Review, American Economic Association, vol. 79(5), pages 1214-23, December.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
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