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The Strategic Role of Nonbinding Communication

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  • Luis A. Palacio
  • Alexandra Cortés-Aguilar
  • Manuel Muñoz-Herrera

Abstract

This paper studies the conditions that improve bargaining power using threats and promises. We develop a model of strategic communication, based on the conflict game with perfect information, in which a noisy commitment message is sent by a better‐informed sender to a receiver who takes an action that determines the welfare of both. Our model captures different levels of aligned‐preferences, for which classical games such as stag hunt, hawk-dove, and prisoner’s dilemma are particular cases. We characterise the Bayesian perfect equilibrium with nonbinding messages under truth-telling beliefs and sender’s bargaining power assumptions. Through our equilibrium selection we show that the less conflict the game has, the more informative the equilibrium signal is and less credibility is necessary to implement it.

Suggested Citation

  • Luis A. Palacio & Alexandra Cortés-Aguilar & Manuel Muñoz-Herrera, 2015. "The Strategic Role of Nonbinding Communication," Journal of Applied Mathematics, John Wiley & Sons, vol. 2015(1).
    • Handle: RePEc:wly:jnljam:v:2015:y:2015:i:1:n:910614
    DOI: 10.1155/2015/910614
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    References listed on IDEAS

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    1. Rabin, Matthew, 1990. "Communication between rational agents," Journal of Economic Theory, Elsevier, vol. 51(1), pages 144-170, June.
    2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    3. Gary Bolton, 1998. "Bargaining and Dilemma Games: From Laboratory Data Towards Theoretical Synthesis," Experimental Economics, Springer;Economic Science Association, vol. 1(3), pages 257-281, December.
    4. Klein, Daniel B. & O'Flaherty, Brendan, 1993. "A game-theoretic rendering of promises and threats," Journal of Economic Behavior & Organization, Elsevier, vol. 21(3), pages 295-314, August.
    5. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October.
    6. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
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    2. Luis Alejandro Palacio Garcia & Brayan Snehider D�az, 2022. "Comunicación, jugadas estratégicas y compromiso: un análisis desde la economía experimental," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 41(73), pages 17-42.

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