Editing Cheap talk (section)

{{Short description|Game-theoretic concept}}
In [[game theory]], '''cheap talk''' is communication between players that does not directly affect the payoffs of the game. Providing and receiving information is free. This is in contrast to [[signalling (economics)|signalling]], in which sending certain messages may be costly for the sender depending on the state of the world.

This basic setting set by [[Vincent Crawford]] and [[Joel Sobel]]<ref name=CS>{{cite journal|last1=Crawford|first1=Vincent P.|last2=Sobel|first2=Joel|title=Strategic Information Transmission|journal=Econometrica|date=November 1982|volume=50|issue=6|pages=1431–1451|doi=10.2307/1913390|jstor=1913390|citeseerx=10.1.1.295.3462}}</ref> has given rise to a variety of variants.

To give a formal definition, cheap talk is communication that is:<ref>{{cite journal |last=Farrell |first=Joseph |title=Cheap Talk, Coordination, and Entry |journal=[[The RAND Journal of Economics]] |volume=18 |issue=1 |year=1987 |pages=34–39 |jstor=2555533}}</ref>
# costless to transmit and receive
# non-binding (i.e. does not limit strategic choices by either party)
# unverifiable (i.e. cannot be verified by a third party like a court)
Therefore, an agent engaging in cheap talk could lie with impunity, but may choose in equilibrium not to do so.