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Starting Small to Communicate

Author

Listed:
  • Alp Atakan

    (Koc University, QueenMary Univ. of London)

  • Levent Kockesen

    (Koc University)

  • Elif Kubilay

    () (Institute for Social and Economic Research, University of Essex)

Abstract

We analyze a repeated cheap-talk game in which the receiver is privately informed about the conflict of interest between herself and the sender and either the sender or the receiver controls the stakes involved in their relationship. We focus on payoff-dominant equilibria that satisfy a Markovian property and show that if the potential conflict of interest is large, then the stakes increase over time, i.e., “starting small” is the unique equilibrium arrangement. In each period, the receiver plays the sender’s ideal action with positive probability and the sender provides full information as long as he has always observed his ideal actions in the past. We also show that as the potential conflict of interest increases, the extent to which the stakes are back-loaded increases, i.e., stakes are initially smaller but grow faster.

Suggested Citation

  • Alp Atakan & Levent Kockesen & Elif Kubilay, 2018. "Starting Small to Communicate," Koç University-TUSIAD Economic Research Forum Working Papers 1805, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:1805
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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1805.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Communication; Cheap Talk; Reputation; Repeated Games; Career Path; Gradualism; Starting Small.;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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