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Communication and coordination with constraints

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  • Raghul S. Venkatesh

    (Indian Institute of Science Education and Research)

Abstract

I study incentives for communication and policymaking in the presence of information asymmetry and constraints on the set of feasible policies. An informed and an uninformed agent both take decisions in a coordination game such that their actions exhibit positive spillover and are imperfectly substitutable. When agents communicate via cheap talk prior to the coordination stage, there is full information revelation as long as constraints are not binding. When constraints bind, communication results in threshold equilibria and partial revelation of information. The most informative threshold equilibrium maximizes the welfare of both agents. This paper is the first in the literature to establish a relationship between action constraints and incentives for strategic communication.

Suggested Citation

  • Raghul S. Venkatesh, 2024. "Communication and coordination with constraints," Review of Economic Design, Springer;Society for Economic Design, vol. 28(1), pages 89-124, February.
    • Handle: RePEc:spr:reecde:v:28:y:2024:i:1:d:10.1007_s10058-023-00336-8
    DOI: 10.1007/s10058-023-00336-8
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    More about this item

    Keywords

    Cheap talk; Capacity constraints; Strategic substitutes;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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