Renegotiation-Proof Cheap Talk

Steven Kivinen () and Christoph Kuzmics ()
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Steven Kivinen: University of Graz, Austria
Christoph Kuzmics: University of Graz, Austria

No 2025-11, Graz Economics Papers from University of Graz, Department of Economics

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.

Keywords: cheap talk; renegotiation; information transmission; persuasion (search for similar items in EconPapers)
JEL-codes: C72 C73 D83 (search for similar items in EconPapers)
Date: 2025-07
New Economics Papers: this item is included in nep-mic
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