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Selecting cheap-talk equilibria

Selecting cheap-talk equilibria
Selecting cheap-talk equilibria
There are typically multiple equilibrium outcomes in the Crawford–Sobel (CS) model of strategic information transmission. This paper identifies a simple condition on equilibrium payoffs, called NITS (no incentive to separate), that selects among CS equilibria. Under a commonly used regularity condition, only the equilibrium with the maximal number of induced actions satisfies NITS. We discuss various justifications for NITS, including perturbed cheap-talk games with nonstrategic players or costly lying. We also apply NITS to other models of cheap talk, illustrating its potential beyond the CS framework.
cheap talk, babbling, equilibrium selection, almost-cheap talk
0012-9682
117-136
Chen, Ying
338aa31f-c129-49c9-b5b7-b583836a8cc1
Kartik, Navin
5740dec2-7347-40dd-920d-42cdc1fd7636
Sobel, Joel
35aec069-bfa9-4310-8ea1-d5c6ec78aae9
Chen, Ying
338aa31f-c129-49c9-b5b7-b583836a8cc1
Kartik, Navin
5740dec2-7347-40dd-920d-42cdc1fd7636
Sobel, Joel
35aec069-bfa9-4310-8ea1-d5c6ec78aae9

Chen, Ying, Kartik, Navin and Sobel, Joel (2008) Selecting cheap-talk equilibria. Econometrica, 76 (1), 117-136. (doi:10.1111/j.0012-9682.2008.00819.x).

Record type: Article

Abstract

There are typically multiple equilibrium outcomes in the Crawford–Sobel (CS) model of strategic information transmission. This paper identifies a simple condition on equilibrium payoffs, called NITS (no incentive to separate), that selects among CS equilibria. Under a commonly used regularity condition, only the equilibrium with the maximal number of induced actions satisfies NITS. We discuss various justifications for NITS, including perturbed cheap-talk games with nonstrategic players or costly lying. We also apply NITS to other models of cheap talk, illustrating its potential beyond the CS framework.

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Published date: January 2008
Keywords: cheap talk, babbling, equilibrium selection, almost-cheap talk
Organisations: Economics

Identifiers

Local EPrints ID: 353790
URI: https://eprints.soton.ac.uk/id/eprint/353790
ISSN: 0012-9682
PURE UUID: a756e3fc-428e-4c05-bebf-60817d79eec7

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Date deposited: 18 Jun 2013 09:15
Last modified: 18 Jul 2017 04:00

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