Valuable Cheap Talk and Equilibrium Selection

Valuable Cheap Talk and Equilibrium Selection

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 equilibrium. At the same time, however, such preplay communication has been suggested as a rationale for expecting Nash equilibrium in general. This paper presents a plausible formal model of cheap talk that distinguishes and resolves these po...

Equilibrium selection in experimental cheap talk games

In the past, many refinements have been proposed to select equilibria in cheap talk games. Usually, these refinements were motivated by a discussion of how rational agents would reason in some particular cheap talk games. In this paper, we propose a new refinement and stability measure that is intended to predict actual behavior in a wide range of cheap talk games. According to our Average Cred...

Equilibrium Selection in Cheap Talk Games: ACDC Rocks when Other Criteria Remain Silent

Cheap Talk in Monetary Policy: A General Equilibrium Approach

In a general equilibrium model with a central bank (CB) and a continuum of private agents, there are two groups of agents, owners and workers. The objective of the CB is to maximize a weighted average of utilities of these two groups. There are two possible types of the CB, differing in the relative weights in averaging the two groups’ utilities. The realized type of the CB is private informati...

Selecting Cheap-talk Equilibria Selecting Cheap-talk Equilibria

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