In this Paper, we provide an explanation of the democratic peace hypothesis, i.e., the observation that democracies rarely fight one another. We show that in the presence of information asymmetries and strategic complements, the strategic interaction between two democracies differs from any...

We explore the optimal delegation of decision rights by a principal to a better informed but biased agent. In an infinitely repeated game a long-lived principal faces a series of short-lived agents. Every period they play a cheap talk game a la Crawford and Sobel (1982) with constant bias,...

A firm must decide whether to launch a new product. A launch implies considerable fixed costs, so the firm would like to assess downstream demand before it decides. We study under which conditions a potential buyer would be willing to reveal his willingness to pay under different pricing...

In this Paper we extend the cheap talk model of Crawford and Sobel (1982) to a multidimensional state space and policy space. We provide a characterization of equilibria. We focus on the question of feasibility of information transmission, for large degrees of conflict of interests between the...

We examine strategic information transmission in a controlled laboratory experiment of a cheap talk game with one sender and multiple receivers. We study the change in equilibrium behavior from the addition of another audience as well as from varying the degree of conflict between the sender's...

We consider a frictional two-sided matching market in which one side uses public cheap-talk announcements so as to attract the other side. We show that if the first-price auction is adopted as the trading protocol, then cheap talk can be perfectly informative, and the resulting market outcome is...

Directed search models are market games in which each firm announces a wage commitment to attract a worker. Miscoordination among workers generates search frictions, yet in equilibrium more productive firms post more attractive wage commitments to fill their vacancies faster, which yields...