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Neutrally Stable Outcomes in Cheap Talk Games

Author

Listed:
  • Banerjee, Abhijit

    (M.I.T)

  • Weibull, Jörgen W.

    (Stockholm School of Economics)

Abstract

This paper examines equilibrium and stability in symmetric two-player cheap-talk games. In particular, we characterize the set of neutrally stable outcomes in finite cheap-talk 2 x 2 coordination games. This set is finite and functionally independent of risk-dominance relations. As the number of messages goes to infinity, this set expands to a countable limit set that has exactly one cluster point, the Pareto efficient Nash equilibrium payoff. In contrast, the set of outcomes that are strategically stable for some finite message set is shown to be dense in the interval spanned by the Nash equilibrium payoffs of the game. We also show that the limit set of neutrally stable outcomes coincides with the set of neutrally stable outcomes for countable infinite message sets.

Suggested Citation

  • Banerjee, Abhijit & Weibull, Jörgen W., 1996. "Neutrally Stable Outcomes in Cheap Talk Games," Working Paper Series 450, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0450
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    GAME; THEORY;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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