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Renegotiation-Proof Cheap Talk

Author

Listed:
  • Steven Kivinen

    (University of Graz, Austria)

  • Christoph Kuzmics

    (University of Graz, Austria)

Abstract

An informed Advisor and an uninformed Decision-Maker, with conflicting interests, engage in repeated cheap talk communication in always new decision problems. While the Decision-Maker's optimal payoff is attainable in some subgame-perfect equilibrium, no payoff profile close to the Decision-Maker's optimal one is immune to renegotiation. Pareto efficient renegotiation-proof equilibria entail a compromise between the Advisor and the Decision-Maker. This could involve the Advisor being truthful and the Decision-Maker not fully utilizing this information to their advantage, or the Advisor exaggerating the truth and the Decision-Maker pretending to believe them.

Suggested Citation

  • Steven Kivinen & Christoph Kuzmics, 2025. "Renegotiation-Proof Cheap Talk," Graz Economics Papers 2025-11, University of Graz, Department of Economics.
    • Handle: RePEc:grz:wpaper:2025-11
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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