Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94903
Authors: 
Banerjee, Abhijit
Weibull, Jörgen W.
Year of Publication: 
1996
Series/Report no.: 
IUI Working Paper 450
Abstract: 
This paper examines equilibrium and stability in symmetric two-player cheap-talk games. In particular, we characterize the set of neutrally stable outcomes in finite cheap-talk 2 x 2 coordination games. This set is finite and functionally independent of risk-dominance relations. As the number of messages goes to infinity, this set expands to a countable limit set that has exactly one cluster point, the Pareto efficient Nash equilibrium payoff. In contrast, the set of outcomes that are strategically stable for some finite message set is shown to be dense in the interval spanned by the Nash equilibrium payoffs of the game. We also show that the limit set of neutrally stable outcomes coincides with the set of neutrally stable outcomes for countable infinite message sets.
Subjects: 
GAME
THEORY
JEL: 
C70
C70
C73
Document Type: 
Working Paper

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