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Title:Efficiency, communication and honesty PDF Logo
Authors:Demichelis, Stefano
Weibull, Jörgen W.
Issue Date:2006
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 645
Abstract:We here develop a model of pre-play communication that generalizes the cheap-talk approach by allowing players to have a lexicographic preference, second to the payoffs in the underlying game, for honesty. We formalize this by way of an honesty (or truth) correspondence between actions and statements, and postulate two axioms met by natural languages. The model is applied to finite and symmetric two-player games and we establish that honest communication and play of the Pareto dominant Nash equilibrium together characterize the unique evolutionarily stable set in generic and symmetric n×n-coordination games. In particular, this holds even in Aumann's (1990) example of a Pareto dominant equilibrium that is not self-enforcing.
Subjects:efficiency
communication
coordination
honesty
evolutionary stability
JEL:C72
C73
D01
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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