Cheap Talk with Strategic Substitutability

Raghul Venkatesh ()

CRETA Online Discussion Paper Series from Centre for Research in Economic Theory and its Applications CRETA

Abstract: In the classic Crawford-Sobel (CS) model of strategic communication between an informed Sender and uninformed Receiver, perfect information transmission is never achieved as an equilibrium outcome. I present a modified version of the CS cheap talk game with the following two innovations : (i) both players take actions, and (ii) actions are strategic substitutes. In contrast to the CS setup, the modified game can facilitate perfect information revelation. I characterize the conditions under which a full information revelation equilibrium exists. When these conditions are violated, only partial revelation equilibria exist. Under partial revelation, the Sender reveals information up to a threshold state and pools beyond this threshold, resulting in some loss of information. Welfare analysis suggests that partial revelation equilibria with a higher threshold pareto dominate those with lower thresholds. Crucially, a higher threshold equilibrium is also interim efficient – every Sender type at least weakly prefers this over a lower threshold equilibrium.

Keywords: Cheap talk; interdependent action games; full information revelation (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-hpe and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://warwick.ac.uk/fac/soc/economics/research/c ... _creta_venkatesh.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:wrk:wcreta:31

Access Statistics for this paper

More papers in CRETA Online Discussion Paper Series from Centre for Research in Economic Theory and its Applications CRETA Contact information at EDIRC.
Bibliographic data for series maintained by Margaret Nash ().