Cheap talk
Encyclopedia
In game theory
, cheap talk is communication between players which does not directly affect the payoffs of the game. This is in contrast to signaling in which sending certain messages may be costly for the sender depending on the state of the world. The classic example is of an expert (say, ecological) trying to explain the state of the world to an uninformed decision maker (say, politician voting on a deforestation bill). The decision maker, after hearing the report from the expert, must then make a decision which affects the payoffs of both players.
. Each player announces whether they intend to go to the football game, or the opera. Because the Battle of the Sexes is a coordination game
, this initial round of communication may enable the players to randomize among equilibria yielding payoffs [2.5,2.5] which cannot be achieved with any pure or mixed strategy without cheap talk. The messages and strategies which yield this outcome are symmetric for each player. They are: 1) announce opera or football with even probability 2) if a person announces opera(or football), then upon hearing this message the other person will say opera(or football) as well (Farrell and Rabin
, 1996). If they both announce different options, then no coordination is achieved.
It is not guaranteed, however, that cheap talk will have an effect on equilibrium payoffs. Another game, the Prisoner's Dilemma
, is a game whose only equilibrium is in dominant strategies. Any pre-play cheap talk will be ignored and players will play their dominant strategies (Defect,Defect) regardless of the messages sent.
authors have often argued that costly signalling best explains signalling between animals (see Handicap principle
, Signalling theory
). This general belief has been receiving some challenges (see work by Carl Bergstrom and Brian Skyrms
2002, 2004). In particular, several models using evolutionary game theory
indicate that cheap talk can have effect on the evolutionary dynamics of particular games.
Game theory
Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...
, cheap talk is communication between players which does not directly affect the payoffs of the game. This is in contrast to signaling in which sending certain messages may be costly for the sender depending on the state of the world. The classic example is of an expert (say, ecological) trying to explain the state of the world to an uninformed decision maker (say, politician voting on a deforestation bill). The decision maker, after hearing the report from the expert, must then make a decision which affects the payoffs of both players.
Application
Cheap talk can, in general, be added to any game and has the potential to enhance the set of possible equilibrium payoffs. For example, one can add a round of cheap talk in the beginning of the Battle of the SexesBattle of the sexes (game theory)
In game theory, battle of the sexes , also called Bach or Stravinsky, is a two-player coordination game. Imagine a couple that agreed to meet this evening, but cannot recall if they will be attending the opera or a football match. The husband would most of all like to go to the football game. The...
. Each player announces whether they intend to go to the football game, or the opera. Because the Battle of the Sexes is a coordination game
Coordination game
In game theory, coordination games are a class of games with multiple pure strategy Nash equilibria in which players choose the same or corresponding strategies...
, this initial round of communication may enable the players to randomize among equilibria yielding payoffs [2.5,2.5] which cannot be achieved with any pure or mixed strategy without cheap talk. The messages and strategies which yield this outcome are symmetric for each player. They are: 1) announce opera or football with even probability 2) if a person announces opera(or football), then upon hearing this message the other person will say opera(or football) as well (Farrell and Rabin
Matthew Rabin
Matthew Joel Rabin is the Edward G. and Nancy S. Jordan Professor of Economics in the Department of Economics at the University of California, Berkeley...
, 1996). If they both announce different options, then no coordination is achieved.
It is not guaranteed, however, that cheap talk will have an effect on equilibrium payoffs. Another game, the Prisoner's Dilemma
Prisoner's dilemma
The prisoner’s dilemma is a canonical example of a game, analyzed in game theory that shows why two individuals might not cooperate, even if it appears that it is in their best interest to do so. It was originally framed by Merrill Flood and Melvin Dresher working at RAND in 1950. Albert W...
, is a game whose only equilibrium is in dominant strategies. Any pre-play cheap talk will be ignored and players will play their dominant strategies (Defect,Defect) regardless of the messages sent.
Biological applications
It has been commonly argued that cheap talk will have no effect on the underlying structure of the game. In biologyBiology
Biology is a natural science concerned with the study of life and living organisms, including their structure, function, growth, origin, evolution, distribution, and taxonomy. Biology is a vast subject containing many subdivisions, topics, and disciplines...
authors have often argued that costly signalling best explains signalling between animals (see Handicap principle
Handicap principle
The handicap principle is a hypothesis originally proposed in 1975 by biologist Amotz Zahavi to explain how evolution may lead to "honest" or reliable signaling between animals who have an obvious motivation to bluff or deceive each other...
, Signalling theory
Signalling theory
Within evolutionary biology, signalling theory is a body of theoretical work examining communication between individuals. The central question is when organisms with conflicting interests should be expected to communicate "honestly"...
). This general belief has been receiving some challenges (see work by Carl Bergstrom and Brian Skyrms
Brian Skyrms
Brian Skyrms is a Distinguished Professor of Logic and Philosophy of Science and Economics at the University of California, Irvine and a Professor of Philosophy at Stanford University. He has worked on problems in the philosophy of science, causation, decision theory, game theory, and the...
2002, 2004). In particular, several models using evolutionary game theory
Evolutionary game theory
Evolutionary game theory is the application of Game Theory to evolving populations of lifeforms in biology. EGT is useful in this context by defining a framework of contests, strategies and analytics into which Darwinian competition can be modelled. It originated in 1973 with John Maynard Smith...
indicate that cheap talk can have effect on the evolutionary dynamics of particular games.