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Cheap talk in games with incomplete information
Authors:Elchanan Ben-Porath
Institution:a Department of Economics, The Center for Rationality, The Hebrew University of Jerusalem, Feldman Building, Givaat-Ram, Jerusalem, Israel
b Eitan Berglas School of Economics, Tel-Aviv University, Israel
Abstract:The paper studies Bayesian games which are extended by adding pre-play communication. Let Γ be a Bayesian game with full support and with three or more players. The main result is that if players can send private messages to each other and make public announcements then every communication equilibrium outcome, q, that is rational (i.e., involves probabilities that are rational numbers) can be implemented in a sequential equilibrium of a cheap talk extension of Γ, provided that the following condition is satisfied: There exists a Bayesian Nash equilibrium s in Γ such that for each type ti of each player i the expected payoff of ti in q is larger than the expected payoff of ti in s.
Keywords:C7
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