Meaningful talk

In cheap- and costly-talk games, an informed player (the sender) sends a verbal message about its type to an uninformed player (the receiver). The use of Nash equilibrium, and its refinements, implies that the assignment of messages to types is what determines the message’s interpretation. We propose instead an equilibrium concept where the verbal message itself is the crucial piece of new information in the communication process between sender and receiver, and truth and trust functions are incorporated in the inferential process that takes place in parallel. The sender’s message leads the receiver to update priors only if it is comprehensible (i.e., uttered in a language shared by both players), relevant (i.e., more specific than the common priors), and trusted. Trust requires a leap of faith because a verbal message never proves what it states; hence, mistrust equilibria are possible even if an informative equilibrium exists where the sender’s message is true. Trust equilibria may be uninformative, in which case linguistic conventions show through what is not stated, e.g., “This car is a lemon.” This framework strives to integrate, on the one hand, the game-theoretic view that the equilibrium meaning depends on the sender’s strategic incentives, with, on the other, the linguistic view that messages are verbal symbols that convey common understandings through their literal meaning.