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Should the Talk be Cheap in Contribution Games?

Chang Jen-Wen ()
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Chang Jen-Wen: Department of Economics, California State University Fullerton Steven G Mihaylo College of Business and Economics, Fullerton, CA 92834-6848, USA

The B.E. Journal of Theoretical Economics, 2020, vol. 20, issue 2, 16

Abstract: This paper studies the equilibria of contribution games with commitment and with cheap talk under incomplete information. When agents contribute to a club good, we find that with commitment, high types contribute early to induce low types to contribute in later rounds. With cheap talk, low types signal to contribute early but may drop out later if they find the total contributions are low. When there are sufficiently many rounds, we construct a cheap talk equilibrium that implements the ex-post efficient and ex-post individually rational allocation. In contrast, every equilibrium of the commitment game is inefficient. When the good is a public good, the cheap-talk game admits no informative equilibria. In this case, the equilibria of the commitment game may be more efficient.

Keywords: cheap talk; commitment; dynamic contribution; free-riding (search for similar items in EconPapers)
JEL-codes: D62 D83 (search for similar items in EconPapers)
Date: 2020
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