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Cheap talk and burned money. (English) Zbl 1127.91366

Summary: We augment the standard Crawford-Sobel model [V. P. Crawford and J. Sobel, Econometrica 50, 1431–1451 (1982; Zbl 0494.94007)] of cheap talk communication by allowing the informed party to use both costless and costly messages. The issues on which we focus are the consequences for cheap talk signaling of the option to use a costly signal (“burned money”); the circumstances under which both cheap talk and burned money are used to signal information; and the extent to which burning money is the preferred instrument for information transmission.

MSC:

91A28 Signaling and communication in game theory
91B44 Economics of information
91B50 General equilibrium theory

Citations:

Zbl 0494.94007
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References:

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