Renegotiation-Proof Cheap Talk

Steven Kivinen and Christoph Kuzmics

Papers from arXiv.org

Abstract: An informed Advisor and an uninformed Decision-Maker, with conflicting interests, engage in repeated cheap talk communication in always new decision problems. While the Decision-Maker's optimal payoff is attainable in some subgame-perfect equilibrium, no payoff profile close to the Decision-Maker's optimal one is immune to renegotiation. Pareto efficient renegotiation-proof equilibria entail a compromise between the Advisor and the Decision-Maker. This could involve the Advisor being truthful and the Decision-Maker not fully utilizing this information to their advantage, or the Advisor exaggerating the truth and the Decision-Maker pretending to believe them.

Date: 2025-02, Revised 2025-07
New Economics Papers: this item is included in nep-gth and nep-mic
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http://arxiv.org/pdf/2502.08296 Latest version (application/pdf)

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Working Paper: Renegotiation-Proof Cheap Talk (2025)
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