Serie Documentos de Trabajo, Universidad del CEMA: Área: economía y linguística 443
In economics, the standard approach to language is that talk is cheap. Here, instead, language is a social convention that affects utility. Unless language is used in its ordinary sense, it cannot help to coordinate actions because there is no way of decoding it. This points to a unique informative equilibrium where words are used in their ordinary sense in natural language. Misrepresentation costs may eliminate uninformative, babbling, equilibria. More generally, meaningful talk provides a concrete mechanism through which consistent expectations are generated in Nash equilibria.
cheap talk symbols meaning encoding-decoding common priors Nash equilibria