Unmediated communication in games with complete and incomplete information

Abstract

We study the effects of adding unmediated communication to static, finite games of complete and incomplete information. We characterize S U( G), the set of outcomes of a game G, that are induced by sequential equilibria of cheap talk extensions. A cheap talk extension of G is an extensive-form game in which players communicate before playing G. A reliable mediator is not available and players exchange private or public messages that do not affect directly their payoffs. We first show that if G is a game of complete information with five or more players and rational parameters, then S U( G) coincides with the set of correlated equilibria of G. Next, we demonstrate that if G is a game of incomplete information with at least five players, rational parameters and full support (i.e., all profiles of types have positive probability), then S U( G) is equal to the set of communication equilibria of G.