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Meaningful talk

  • Jorge M. Streb
  • Gustavo Torrens

We incorporate semiotics into economic theory, modeling communication with an encoding-decoding step where the sender transmits a message that the receiver can understand if and only if a common natural language is used. We add an inferential step where the receiver may either believe the literal meaning or disregard it in updating priors. This prevents conflating encrypted and ordinary messages, eliminating informative equilibria where language is used arbitrarily. Unlike cheap and costly talk models, informative equilibria exist only if the senders’ payoffs improve relative to the uninformative equilibrium. In informative equilibria, natural language works as an equilibrium selection mechanism.

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Paper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 443.

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Length: 41 pages
Date of creation: Feb 2011
Date of revision: Mar 2014
Handle: RePEc:cem:doctra:443
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  1. repec:cup:cbooks:9780521593069 is not listed on IDEAS
  2. Ostrom, Elinor, 2009. "Beyond Markets and States: Polycentric Governance of Complex Economic Systems," Nobel Prize in Economics documents 2009-4, Nobel Prize Committee.
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  6. Joseph Farrell., 1986. "Meaning and Credibility in Cheap-Talk Games," Economics Working Papers 8609, University of California at Berkeley.
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  11. Coase, R H, 1976. "Adam Smith's Views of Man," Journal of Law and Economics, University of Chicago Press, vol. 19(3), pages 529-46, October.
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  14. Navin Kartik, 2008. "Strategic Communication with Lying Costs," 2008 Meeting Papers 350, Society for Economic Dynamics.
  15. Hefei Wang, 2009. "Reputation acquisition of underwriter analysts - Theory and evidence," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 331-363, November.
  16. Robert J. Leonard, 1992. "Reading Cournot, Reading Nash / or / The Emergence and Stabilization of the Nash equilibrium," Cahiers de recherche du Département des sciences économiques, UQAM 9214, Université du Québec à Montréal, Département des sciences économiques.
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