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Communication, Renegotiation and Coordination with Private Values

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  • Yuval Heller
  • Christoph Kuzmics

Abstract

An equilibrium is communication-proof if it is unaffected by new opportunities to communicate and renegotiate. We characterize the set of equilibria of coordination games with pre-play communication in which players have private preferences over the feasible coordinated outcomes. Communication-proof equilibria provide a narrow selection from the large set of qualitatively diverse Bayesian Nash equilibria in such games. Under a communication-proof equilibrium, players never miscoordinate, play their jointly preferred outcome whenever there is one, and communicate only the ordinal part of their preferences. Moreover, such equilibria are robust to changes in players' beliefs, interim Pareto efficient, and evolutionarily stable.

Suggested Citation

  • Yuval Heller & Christoph Kuzmics, 2020. "Communication, Renegotiation and Coordination with Private Values," Papers 2005.05713, arXiv.org, revised Sep 2020.
  • Handle: RePEc:arx:papers:2005.05713
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    File URL: http://arxiv.org/pdf/2005.05713
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    References listed on IDEAS

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    1. Sandeep Baliga & Tomas Sjöström, 2004. "Arms Races and Negotiations," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 351-369.
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    3. Rabin Matthew, 1994. "A Model of Pre-game Communication," Journal of Economic Theory, Elsevier, vol. 63(2), pages 370-391, August.
    4. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, September.
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    7. Bruno Strulovici, 2017. "Contract Negotiation and the Coase Conjecture: A Strategic Foundation for Renegotiation‐Proof Contracts," Econometrica, Econometric Society, vol. 85, pages 585-616, March.
    8. Kim, Yong-Gwan & Sobel, Joel, 1995. "An Evolutionary Approach to Pre-play Communication," Econometrica, Econometric Society, vol. 63(5), pages 1181-1193, September.
    9. Evans, Robert & Maskin, Eric, 1989. "Efficient renegotiation--proof equilibria in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 361-369, December.
    10. Kei Kawakami, 2016. "Posterior renegotiation-proofness in a two-person decision problem," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(4), pages 893-931, November.
    11. Maestri, Lucas, 2017. "Dynamic contracting under adverse selection and renegotiation," Journal of Economic Theory, Elsevier, vol. 171(C), pages 136-173.
    12. Sugden, Robert, 1995. "A Theory of Focal Points," Economic Journal, Royal Economic Society, vol. 105(430), pages 533-550, May.
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