math-lab

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Cheap talk

A message costs nothing. That does not make it believed.

Players can send messages before they choose their actions. The messages cost nothing and do not bind anyone. Whether the messages help depends on whether interests are aligned.

Send a message, then choose your action. Does the message change anything?

When both players want the same outcome, a costless message can solve the coordination problem.

When their interests conflict, the message is not credible.

Each player expects the other to say whatever is useful, not what is true.

Cheap talk works only when there is little temptation to lie.