Optimal signaling with cheap talk and money burning

Research output: Contribution to journalArticleAcademicpeer-review

2 Citations (Scopus)
5 Downloads (Pure)

Abstract

We study Sender-optimal signaling equilibria with cheap talk and money-burning. Under general assumptions, the Sender never uses money-burning to reveal all states, but always wants to garble information for at least some states. With quadratic preferences and any log-concave density of the states, optimal communication is garbled for all states: money-burning, if used at all, is used to adjust pooling intervals. This is illustrated by studying in depth the well-known uniform-quadratic case. We also show how the presence of a cost of being “caught unprepared” that gives rise to a small change in a common assumption on the Receiver’s utility function makes full revelation through money-burning Sender-optimal.
Original languageEnglish
Pages (from-to)813-850
Number of pages38
JournalInternational Journal of Game Theory
Volume46
Issue number3
DOIs
Publication statusPublished - 12 Nov 2016

Fingerprint

Dive into the research topics of 'Optimal signaling with cheap talk and money burning'. Together they form a unique fingerprint.

Cite this