Renegotiation-Proof Cheap Talk
Theoretical Economics
2025-08-04 v3
Abstract
An informed Advisor and an uninformed Decision-Maker, with conflicting interests, engage in repeated cheap talk communication in always new decision problems. While the Decision-Maker's optimal payoff is attainable in some subgame-perfect equilibrium, no payoff profile close to the Decision-Maker's optimal one is immune to renegotiation. Pareto efficient renegotiation-proof equilibria entail a compromise between the Advisor and the Decision-Maker. This could involve the Advisor being truthful and the Decision-Maker not fully utilizing this information to their advantage, or the Advisor exaggerating the truth and the Decision-Maker pretending to believe them.
Cite
@article{arxiv.2502.08296,
title = {Renegotiation-Proof Cheap Talk},
author = {Steven Kivinen and Christoph Kuzmics},
journal= {arXiv preprint arXiv:2502.08296},
year = {2025}
}