Selecting cheap-talk equilibria
- Author(s): Kartik, Navin
- Sobel, Joel
- Chen, Ying
- et al.
There are typically multiple equilibrium outcomes in the Crawford-Sobel (CS) model of strategic information transmission. This paper identifies a simple condition on equilibrium payoffs, called NITS (no incentive to separate), that selects among CS equilibria. Under a commonly used regularity condition, only the equilibrium with the maximal number of induced actions satisfies NITS. We discuss various justifications for NITS, including perturbed cheap-talk games with nonstrategic players or costly lying. We also apply NITS to other models of cheap talk, illustrating its potential beyond the CS framework.