 Collusive Behaviour, Efficiency and Cheap Talk Negotiation in Repeated GamesAkira Okada and Hamid Sabourian Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge Abstract: This paper addresses the relationship between cheap talk negotiation and collusion/efficiency in repeated games by explicitly modelling the negotiation. At each date, players bargain over how to play the continuation game and thereafter they play a stage game G. We consider equilibria that are measurable with respect to the latest agreement - as they are salient/focal features of the past. We show equilibrium payoffs are bounded below by that of a Nash equilibrium of G and are weakly renegotiation-proof. Our main results are: a non-babbling efficient equilibrium exists in many games if the discount factor δ is high, and every equilibrium payoff is either babbling or efficient in the limit as δ → 1. Finally, we check the robustness of the latter result to two perturbations: complexity costs and trustworthy/honourable players. Equilibria that survive the former perturbation are efficient or induce one-shot Nash equilibria and equilibria that survive the latter are efficient. Keywords: Repeated Games; Cheap Talk Negotiation; Efficiency; Babbling Equilibrium; Complexity Cost; Commitment Type (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2575 Access Statistics for this paper More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge |
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