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Should the Talk be Cheap in Contribution Games?

Author

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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)

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.

Suggested Citation

  • Chang Jen-Wen, 2020. "Should the Talk be Cheap in Contribution Games?," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(2), pages 1-16, June.
    • Handle: RePEc:bpj:bejtec:v:20:y:2020:i:2:p:16:n:12
    DOI: 10.1515/bejte-2019-0082
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    References listed on IDEAS

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    More about this item

    Keywords

    cheap talk; commitment; dynamic contribution; free-riding;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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