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

See all articles by Adrian de Groot Ruiz

Adrian de Groot Ruiz

University of Amsterdam - Faculty of Economics and Business (FEB)

T. J. S. Offerman

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute

Sander Onderstal

University of Amsterdam; Tinbergen Institute

Date Written: November 22, 2012

Abstract

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

de Groot Ruiz, Adrian and Offerman, T. J. S. and Onderstal, Sander, Equilibrium Selection in Cheap Talk Games: ACDC Rocks When Other Criteria Remain Silent (November 22, 2012). Tinbergen Institute Discussion Paper 11-037/1, Available at SSRN: https://ssrn.com/abstract=1761947 or http://dx.doi.org/10.2139/ssrn.1761947

Adrian De Groot Ruiz (Contact Author)

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

T. J. S. Offerman

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Sander Onderstal

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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