Communication and coordination with constraints

I study incentives for communication and policymaking in the presence of information asymmetry and constraints on the set of feasible policies. An informed and an uninformed agent both take decisions in a coordination game such that their actions exhibit positive spillover and are imperfectly substi...

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Bibliographic Details
Published in:Review of economic design 2024-02, Vol.28 (1), p.89-124
Main Author: Venkatesh, Raghul S.
Format: Article
Language:English
Subjects:
Behavioral/Experimental Economics
Communication
Decision making
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Equilibrium
Game Theory
Incentives
Information sharing
Microeconomics
Original Paper
Political alliances
Social and Behav. Sciences
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Summary:I study incentives for communication and policymaking in the presence of information asymmetry and constraints on the set of feasible policies. An informed and an uninformed agent both take decisions in a coordination game such that their actions exhibit positive spillover and are imperfectly substitutable. When agents communicate via cheap talk prior to the coordination stage, there is full information revelation as long as constraints are not binding. When constraints bind, communication results in threshold equilibria and partial revelation of information. The most informative threshold equilibrium maximizes the welfare of both agents. This paper is the first in the literature to establish a relationship between action constraints and incentives for strategic communication.
ISSN:1434-4742
1434-4750
DOI:10.1007/s10058-023-00336-8