Publication Date: May 2002
In this paper we study the eﬀects of adding unmediated communication to static, ﬁnite games of complete and incomplete information. We characterize SU(G), the set of outcomes of a game G, that are induced by sequential equilibria of cheap talk extensions. A cheap talk extension of G is an extensive-form game in which players communicate before playing G. A reliable mediator is not available and players exchange private or public messages that do not aﬀect directly their payoﬀs. We ﬁrst show that if G is a game of complete information with ﬁve or more players and rational parameters, then SU(G) coincides with the set of correlated equilibria of G. Next, we demonstrate that if G is a game of incomplete information with at least ﬁve players, rational parameters and full support (i.e. all proﬁles of types have positive probability), then SU(G) is equal to the set of communication equilibria of G.
Communication, Correlated equilibrium, Communication equilibrium, Sequential equilibrium, Mechanism design, Revelation principle
JEL Classification Codes: C72
See CFP: 1083