Renegotiation-Proof Cheap Talk

Steven Kivinen and Christoph Kuzmics

Papers from arXiv.org

Abstract: An informed Advisor and an uninformed Decision-Maker engage in repeated cheap talk communication in always new (stochastically independent) decision problems. They have a conflict of interest over which action should be implemented at least in some cases. Our main result is that, while the Decision-Maker's optimal payoff is attainable in some subgame perfect equilibrium (by force of the usual folk theorem), no payoff profile close to the Decision-Maker's optimal one is immune to renegotiation. Pareto efficient renegotiation-proof equilibria are typically attainable, and they entail a compromise between the Advisor and the Decision-Maker. This could take the form of the Advisor being truthful and the Decision-Maker not utilizing this information to their own full advantage, or the Advisor being somewhat liberal with the truth and the Decision-Maker, while fully aware of this, pretending to believe the Advisor.

Date: 2025-02
New Economics Papers: this item is included in nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2502.08296 Latest version (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:arx:papers:2502.08296

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().