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Cheap talk and cooperation in Stackelberg games

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  • Raimo P. Hämäläinen

    (Aalto University School of Science)

  • Ilkka Leppänen

    (Aalto University School of Science)

Abstract

Previous literature on cheap talk suggests that it is used to increase cooperation. We study cheap talk and the effect of the leader’s private payoff information in new repeated Stackelberg game settings. Our results confirm earlier studies that the players cooperate in repeated Stackelberg games with complete payoff information. In the cheap talk setting the follower has the actual first mover advantage and should in theory benefit from it, but we find that many followers cooperate instead. Similarly, many leaders do not use cheap talk for cheating but commit to symmetric joint-optimum quantities. The leader’s private payoff information results in a low frequency of cooperation but in the presence of cheap talk players do cooperate.

Suggested Citation

  • Raimo P. Hämäläinen & Ilkka Leppänen, 2017. "Cheap talk and cooperation in Stackelberg games," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 25(2), pages 261-285, June.
    • Handle: RePEc:spr:cejnor:v:25:y:2017:i:2:d:10.1007_s10100-016-0444-9
    DOI: 10.1007/s10100-016-0444-9
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