Neutrally stable outcomes in cheap-talk coordination games

This paper examines equilibrium and stability in symmetric two-player cheap-talk games and specifically characterizes the set of neutrally stable outcomes in cheap-talk 2 x 2 coordination games. With a finite message set, this set is finite. As the number of messages goes to infinity, the set expands toward a countable limit. The Pareto efficient Nash equilibrium payoff is its unique cluster point. By contrast, the corresponding limit set of strategically stable outcomes is dense in the interval spanned by the Nash equilibrium payoffs of the underlying game. Journal of Economic Literature Classification Number: C70. (C) 2000 Academic Press.