- Equilibrium selection in cheap talk games: ACDC rocks when other criteria remain silent
- Number of pages
- Amsterdam / Rotterdan: Tinbergen Institute
- Tinbergen Institute Discussion Paper
- Volume (Serie)
- TI 2011-037/1
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
Currently, no refinement exists that is successful at selecting equilibria across a wider range of cheap talk games. We propose a generalization of refinements based on credible deviations, in particular neologism proofness and announcement proofness. According to our Average Credible Deviation Criterion (ACDC), the stability of an equilibrium is determined by the frequency and size of credible deviations. ACDC makes sensible predictions in previously studied settings, such as the Crawford Sobel game, and can organize results from experiments well. Finally, ACDC makes predictions in games where other criteria remain silent.
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