On Modeling Cheap Talk in Bayesian Games

Abstract

The “cheap talk games” studied in this chapter are games in which players with private information exchange payoff-irrelevant messages. (Crawford and Sobel (1982)) and (Green and Stokey (1980)) introduced the simplest cheap talk games, those in which a “sender” with private information sends a message to a “receiver,” who then takes an action. Equilibrium refinement criteria for sender-receiver games have been studied extensively,¹ and variations of sender-receiver games have been used to model a variety of phenomena.² Little work, however, has been done on more general cheap talk games. A few studies have considered multiple informed parties, but with only one round of pre-play communication.³ Even fewer studies have considered games with multiple rounds of communication, and then with only one informed party.⁴