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The Algorithmic Advantage: How Reinforcement Learning Generates Rich Communication

Author

Listed:
  • Calvano, Emilio

    (Department of Economics and Financial Markets, Luiss University)

  • Possnig, Clemens

    (School of Economics, University of Waterloo)

  • Tolvanen, Juha

    (Department of Economics and Finance, University of Rome Tor Vergata)

Abstract

We analyze strategic communication when advice is generated by a reinforcement-learning algorithm rather than by a fully rational sender. Building on the cheap-talk framework of Crawford and Sobel (1982), an advisor adapts its messages based on payoff feedback, while a decision maker best-responds. We provide a theoretical analysis of the long-run communication outcomes induced by such reward-driven adaptation. With aligned preferences, we establish that learning robustly leads to informative communication even from uninformative initial policies. With misaligned preferences, no stable outcome exists; instead, learning generates cycles that sustain highly informative communication and payoffs exceeding those of any static equilibrium.

Suggested Citation

  • Calvano, Emilio & Possnig, Clemens & Tolvanen, Juha, 2026. "The Algorithmic Advantage: How Reinforcement Learning Generates Rich Communication," Working Papers 26001, University of Waterloo, Department of Economics.
  • Handle: RePEc:wat:wpaper:26001
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    File URL: https://hdl.handle.net/10012/23582
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    References listed on IDEAS

    as
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