Cheap talk and cooperation in Stackelberg games

Raimo P. Hämäläinen, Ilkka Leppänen*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Previous literature on cheap talk suggests that it is used to increase cooperation. We study cheap talk and the effect of the leader’s private payoff information in new repeated Stackelberg game settings. Our results confirm earlier studies that the players cooperate in repeated Stackelberg games with complete payoff information. In the cheap talk setting the follower has the actual first mover advantage and should in theory benefit from it, but we find that many followers cooperate instead. Similarly, many leaders do not use cheap talk for cheating but commit to symmetric joint-optimum quantities. The leader’s private payoff information results in a low frequency of cooperation but in the presence of cheap talk players do cooperate.

Original languageEnglish
Pages (from-to)261–285
Number of pages25
JournalCENTRAL EUROPEAN JOURNAL OF OPERATIONS RESEARCH
Volume25
Issue number2
DOIs
Publication statusPublished - Jun 2017
MoE publication typeA1 Journal article-refereed

Keywords

  • Cheap talk
  • Cooperation
  • Experiments
  • Private information
  • Stackelberg game

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