Believing when Credible: Talking about Future Plans and Past Actions

Karl Schlag and Péter Vida

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: We explore in an equilibrium framework whether games with multiple Nash equilibria are easier to play when players can communicate. We consider two variants, modelling talk about future plans and talk about past actions. The language from which messages are chosen is endogenous, messages are allowed to be vague. We focus on equilibria where messages are believed whenever possible, thereby develop a theory of credible communication. Predictions confirm the longstanding intuition for Aumann’s (1990) Stag Hunt game which applies directly to an investment game with positive spillovers. Our results shed new light on the multiplicity of equilibria in economic applications.

Keywords: Pre-Play Communication; Cheap Talk; Credibility; Coordination; Language; Multiple Equilibria. (search for similar items in EconPapers)
JEL-codes: C72 D83 (search for similar items in EconPapers)
Date: 2015-09-17
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://epub.ub.uni-muenchen.de/25291/1/517.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:517

Access Statistics for this paper

More papers in Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich Geschwister-Scholl-Platz 1, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().