Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339363 
Year of Publication: 
2026
Series/Report no.: 
ECONtribute Discussion Paper No. 390
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
We study games with incomplete information and characterize when a feasible outcome is Pareto efficient. Outcomes with excessive randomization are inefficient: generically, the total number of action profiles across states must be strictly less than the sum of the number of players and the number of states. We consider three applications. A cheap talk outcome is efficient only if pure; with state-independent sender payoffs, it is efficient if and only if the sender's most preferred action is induced with certainty. In natural settings, Bayesian persuasion outcomes are inefficient across many priors. Finally, ranking-based allocation mechanisms are inefficient under mild conditions.
Subjects: 
Pareto efficiency
Incomplete information
Cheap talk
Bayesian persuasion
JEL: 
C72
D82
D83
Document Type: 
Working Paper

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