Equilibrium Selection in Cheap Talk Games: ACDC Rocks When Other Criteria Remain Silent
Tinbergen Institute Discussion Paper 11-037/1
43 Pages Posted: 16 Feb 2011 Last revised: 27 Nov 2012
Date Written: November 22, 2012
In the past, many refinements have been proposed to select equilibria in cheap talk games. Usually, these refinements were motivated by a discussion of how rational agents would reason in some particular cheap talk games. In this paper, we propose a behavioral refinement and stability measure that is meant to predict actual behavior in a wide range of cheap talk games. According to our Average Credible Deviation Criterion (ACDC), the stability of an equilibrium is determined by the frequency and size of credible deviations. ACDC organizes the results from cheap talk experiments well, even in cases where other criteria remain silent.
Keywords: cheap talk, neologism proofness, credible deviation, refinement, ACDC, experiment
JEL Classification: C72, C92, D82, D83
Suggested Citation: Suggested Citation