Selecting Cheap-Talk Equilibria

  1. Ying Chen1,
  2. Navin Kartik2,
  3. Joel Sobel3,†

Article first published online: 19 FEB 2008

DOI: 10.1111/j.0012-9682.2008.00819.x

Issue

Econometrica

Econometrica

Volume 76, Issue 1, pages 117–136, January 2008

Additional Information

How to Cite

Chen, Y., Kartik, N. and Sobel, J. (2008), Selecting Cheap-Talk Equilibria. Econometrica, 76: 117–136. doi: 10.1111/j.0012-9682.2008.00819.x

Author Information

  1. 1

    Dept. of Economics, Arizona State University, P.O. Box 873806, Tempe, AZ 85287-3806, U.S.A.; yingchen@asu.edu

  2. 2

    Dept. of Economics, University of California at San Diego, 9500 Gilman Drive, La Jolla, CA 92093-0508, U.S.A.; nkartik@ucsd.edu

  3. 3

    Dept. of Economics, University of California at San Diego, 9500 Gilman Drive, La Jolla, CA 92093-0508, U.S.A.; jsobel@ucsd.edu

  1. †

    This paper supersedes portions of Chen's (2007b) “Perturbed Communication Games with Honest Senders and Naive Receivers” and Kartik's (2005) “Information Transmission with Almost-Cheap Talk.” We are grateful to Vince Crawford for encouraging us to write this paper and to David Eil, Sidartha Gordon, Sjaak Hurkens, Melody Lo, John Morgan, various seminar audiences, and three anonymous referees for comments. We thank Steve Matthews for making available an old working paper of his. For advice and support related to this research, Chen and Kartik are indebted to their respective dissertation supervisors David Pearce, Stephen Morris, and Dino Gerardi (Chen), and Doug Bernheim and Steve Tadelis (Kartik). For financial support, Kartik and Sobel thank the National Science Foundation, and Sobel also thanks the Guggenheim Foundation and the Secretaría de Estado de Universidades e Investigación del Ministerio de Educación y Ciencia (Spain). For hospitality and administrative support, Kartik is grateful to the Institute for Advanced Study at Princeton, and Sobel is grateful to the Departament d'Economia i d'Història Econòmica and Institut d'Anàlisi Econòmica of the Universitat Autònoma de Barcelona.

Publication History

  1. Issue published online: 19 FEB 2008
  2. Article first published online: 19 FEB 2008
  3. Manuscript received March, 2007; final revision received October, 2007.

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Keywords:

  • Cheap talk;
  • babbling;
  • equilibrium selection;
  • almost-cheap talk

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.

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