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With Potential Games, Which Outcome Is Better?

Valuable Cheap Talk and Equilibrium Selection

Department of Economics, University of Exeter Business School, Rennes Drive, Exeter EX4 4PU, UK
Academic Editor: Ulrich Berger
Games 2020, 11(3), 34;
Received: 8 June 2020 / Revised: 3 August 2020 / Accepted: 5 August 2020 / Published: 20 August 2020
(This article belongs to the Special Issue Behavioral Game Theory)
Intuitively, we expect that players who are allowed to engage in costless communication before playing a game would be foolish to agree on an inefficient outcome amongst the set of equilibria. At the same time, however, such preplay communication has been suggested as a rationale for expecting Nash equilibria in general. This paper presents a plausible formal model of cheap talk that distinguishes and resolves these possibilities. Players are assumed to have an unlimited opportunity to send messages before playing an arbitrary game. Using an extension of fictitious play beliefs, minimal assumptions are made concerning which messages about future actions are credible and hence contribute to final beliefs. In this environment, it is shown that meaningful communication among players leads to a Nash equilibrium (NE) of the action game. Within the set of NE, efficiency then turns out to be a consequence of imposing optimality on the cheap talk portion of the extended game. This finding contrasts with previous “babbling” results. View Full-Text
Keywords: strategic communication; two-stage games; pareto efficient equilibria; belief formation strategic communication; two-stage games; pareto efficient equilibria; belief formation
MDPI and ACS Style

Jamison, J. Valuable Cheap Talk and Equilibrium Selection. Games 2020, 11, 34.

AMA Style

Jamison J. Valuable Cheap Talk and Equilibrium Selection. Games. 2020; 11(3):34.

Chicago/Turabian Style

Jamison, Julian. 2020. "Valuable Cheap Talk and Equilibrium Selection" Games 11, no. 3: 34.

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