Coordination-free equilibria in cheap talk games

Lu, Shih En

doi:10.1016/j.jet.2016.12.004

Cited by 11 publications

(4 citation statements)

References 26 publications

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“…Refer to Figure 13(b) in Appendix C for the conditional distributions of states implied by the message uses. 35 Note that our findings from the single-sender games contrast with those from other single-sender communication game experiments, in which lying aversion (the over-transmission of information in reference to equilibrium predictions) is frequently documented (e.g., Dickhaut et al, 1995;Blume, et al, 1998Blume, et al, , 2001Gneezy, 2005;Cai and Wang, 2006;Kawagoe and Takizawa, 2009). We speculate that the opportunity to provide truthful information in equilibrium for one dimension or for one state allowed subjects to avoid outright lying while still behaving as predicted.…”

contrasting

confidence: 79%

An experimental analysis of multidimensional cheap talk

Lai

Lim

Wang

2015

Games and Economic Behavior

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We design experimental games that capture the logic of Battaglini's (2002) construction of fully revealing equilibrium in multidimensional cheap talk. Two senders transmit information to a receiver over a 2ˆ2 state space. Despite overall misaligned interests, full revelation is achieved in equilibrium by having the senders truthfully reveal along distinct dimensions. Our experimental findings confirm that more information can be extracted with two senders in a multidimensional setting. The extent to which information is transmitted depends on whether dimensional interests are aligned between a sender and the receiver, the sizes of the message spaces, and the specification of out-of-equilibrium beliefs. While inducing interest alignment on the relevant dimensions and restricting the message spaces facilitated equilibrium play and information transmission, having a fully revealing equilibrium that is supported by implausible beliefs reduced the instances in which the equilibrium was played.Keywords: Strategic Information Transmission; Multidimensional Cheap Talk; Fully Revealing Equilibrium; Robust Equilibrium; Laboratory Experiment JEL classification: C72; C92; D82; D83 * We are grateful to Attila Ambrus, Marco Battaglini, Colin Camerer, Colin Campbell, Vincent Crawford, Shachar Kariv, Navin Kartik, Alec Smith, Joel Sobel and Satoru Takahashi for their valuable comments and suggestions. We are especially grateful to the anonymous advisory editor and referees, whose comments and suggestions helped significantly improve the paper.

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contrasting

confidence: 79%

An experimental analysis of multidimensional cheap talk

Lai

Lim

Wang

2015

Games and Economic Behavior

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“…Impression management is (implicitly) based on the hypothesis that any information disclosed is non-verifiable. From a game-theoretical perspective, whenever information is non-verifiable and disclosure is costless, a cheap talk occurs [2,[81][82][83][84][85]. This concept will be extensively used in this study and will be better presented in Section 3 in relation to sustainability disclosure.…”

Section: Literature Reviewmentioning

confidence: 99%

Sustainability Disclosure in Integrated Reporting: Does It Matter to Investors? A Cheap Talk Approach

Camodeca

Almici

Sagliaschi³

2018

Sustainability

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The purpose of this study is to investigate the value-relevance of corporate sustainability disclosure through integrated reporting. Sustainability disclosure is subject to managers’ discretion. Besides, it is often hardly verifiable. In this respect, integrated reporting could provide the means for a verifiable disclosure, otherwise, in the jargon of game theory, it could be considered as a cheap talk. This paper investigates which of these hypotheses is most likely to occur in reality. In order to do this, a simple theoretical framework is introduced, where sustainability of corporate performances is modelled as a tail-risk for shareholders. Costless signaling games (cheap talk) and persuasion games are reviewed within this context, in order to derive competing theories of sustainability disclosure’s value relevance through integrated reporting. These alternative theories are tested empirically consistent with the theoretical framework presented, in order to identify key-parameters. In this respect, a systematic textual analysis (artificial intelligence) of integrated reports was employed as to build a synthetic measure of sustainability disclosure. The application of this methodology on a sample of European listed companies showed that sustainability disclosure through integrated reporting has no effect on market-valuations, confirming the null hypothesis of integrated reporting resulting in a cheap talk’s babbling equilibrium.

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“…Battaglini (2002) shows that the fully revealing equilibrium is not stable when the information space is one-dimensional. Although others (Ambrus and Lu 2010; Lu 2011) have established the robustness of fully informative equilibria with multiple senders, our article provides more insights on this important topic. Unlike previous findings in standard cheap talk game settings, we find that a fully informative equilibrium can never exist in our framework.…”

Section: Competitive Mediamentioning

confidence: 94%

Selective Reporting of Factual Content by Commercial Media

Zhu¹,

Dukes

2015

Journal of Marketing Research

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The authors study the market for factual content and examine whether competition increases or decreases its provision. Factual content is supplied by commercial media firms, which observe a set of facts depicting the state of the world and selectively decide how to report them. Consumers value content that matches their opinion, which incentivizes media firms to slant their reports by omitting certain facts. Novel features in the authors’ model include consumers’ ability to anticipate the media's incentives for slant and the requirement that all media stances must be supported by facts. Furthermore, consumers find reports with more facts to be more convincing. Despite consumers’ ability to detect slant and their demand for factual support, the research shows that competition results in consumers reading fewer facts and being unable to update their prior beliefs about the state of the world. The authors also find that a monopoly medium may be more polarizing than competitive media and that polarized reporting can be less biased.

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Coordination-free equilibria in cheap talk games

Cited by 11 publications

References 26 publications

An experimental analysis of multidimensional cheap talk

An experimental analysis of multidimensional cheap talk

Sustainability Disclosure in Integrated Reporting: Does It Matter to Investors? A Cheap Talk Approach

Selective Reporting of Factual Content by Commercial Media

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