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Journal of Economic Perspectives: Vol. 10 No. 3 (Summer 1996)

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Cheap Talk

Article Citation

Farrell, Joseph, and Matthew Rabin. 1996. "Cheap Talk." Journal of Economic Perspectives, 10(3): 103-118.

DOI: 10.1257/jep.10.3.103

Abstract

Economists often ask how private information is shared through markets, costly signaling, and other mechanisms. Yet most information sharing is done through ordinary, informal talk. Economists are inconsistent in their view of such 'cheap talk': sometimes it is supposed that communication generally leads to efficient equilibria; other times it is supposed that since 'talk is cheap,' it is never credible. The authors think both views are wrong. In this paper, they describe what some recent research in game theory teaches about when people will convey private information by cheap talk.

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Authors

Farrell, Joseph (U CA, Berkeley and Federal Communications Commission)
Rabin, Matthew (U CA, Berkeley)

JEL Classifications

D82: Asymmetric and Private Information
D83: Search; Learning; Information and Knowledge; Communication; Belief

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