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Selecting Cheap‐Talk Equilibria
Author(s) -
Chen Ying,
Kartik Navin,
Sobel Joel
Publication year - 2008
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.1111/j.0012-9682.2008.00819.x
Subject(s) - sobel operator , mathematical economics , simple (philosophy) , cheap talk , economics , incentive , complete information , microeconomics , computer science , philosophy , artificial intelligence , epistemology , edge detection , image (mathematics) , image processing
There are typically multiple equilibrium outcomes in the Crawford–Sobel (CS) model of strategic information transmission. This paper identifies a simple condition on equilibrium payoffs, called NITS (no incentive to separate), that selects among CS equilibria. Under a commonly used regularity condition, only the equilibrium with the maximal number of induced actions satisfies NITS. We discuss various justifications for NITS, including perturbed cheap‐talk games with nonstrategic players or costly lying. We also apply NITS to other models of cheap talk, illustrating its potential beyond the CS framework.