| Karl Schlag (University of Vienna). |
| Commitments, intentions, truth and Nash equilibria |
| (with Péter Vida) |
| Abstract We explore the common wisdom that games with multiple Nash equilibria are easier to play if players can communicate. We present a simple model of communication in games under complete information with two variants, identified by when communication takes place. Sending a message before play captures talk about intentions, after play captures talk about past commitments. We focus on equilibria where messages are believed whenever possible, thereby develop a theory of credible communication. The connection to credibility in sender-receiver games under incomplete information is discussed. Applying our results to Aumann's Stag Hunt game we find that communication is useless if talk is about commitments, while the efficient outcome is selected if talk is about intentions. This confirms intuition and empirical findings in the literature. |