Credible Communication in Long-Term Relationships

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

No 2026-19, Graz Economics Papers from University of Graz, Department of Economics

Abstract: We study communication between an informed Expert and an uninformed Decision-Maker who face a sequence of decision problems with conflicting interests. Even when both are patient and monitoring is public the Decision-Maker's most-preferred outcome is not credibly sustainable. Any strategy that implements it necessarily involves threats that are not immune to renegotiation. Any credible and efficient equilibrium entails a compromise, thereby giving the Expert information rents. The Decision-Maker's best credible efficient equilibrium varies with the preferences of the Expert and with the Decision Maker's initial uncertainty.

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: 2026-09
New Economics Papers: this item is included in nep-gth and nep-mic
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