Cheap talk and reputation in repeated pre-trial negotiation
نویسنده
چکیده
Infinitely repeated interaction between a defendant and a plaintiff can enhance the credibility of cheap talk and improve efficiency in outcome that would be infeasible without cheap talk. The basic driving force is reputation effect. If the players are concerned about their reputation, cheap talk cannot be taken as meaningless even in a game where the interests of the players are sufficiently conflicting, because possible current gains from opportunistic behavior can be wiped out by future losses in payoff from damaged reputation.
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