Incentives and the Structure of Communication

59 Pages Posted: 28 Feb 2016 Last revised: 21 Jan 2020

Date Written: November 16, 2017

Abstract

This paper analyzes the issue of implementing correlated and communication equilibria when pre-play communication is restricted to a particular network (e.g., a hierarchy). When communication between the mediator and the players is not direct and private, as assumed when invoking the revelation principle, there may be incentives for other players in the network to misbehave during the communication phase while players report their private information to the mediator and the mediator sends suggested actions to the players. To remedy this issue, we provide necessary and sufficient conditions on the topology of the network of communication such that restricting communication between the mediator and the players to a particular network does not restrict the set of (communication equilibrium) outcomes that could otherwise be achieved. We show that for any underlying game and any equilibrium outcome available when communication is direct, there exists a communication scheme restricted to a particular network that implements all such outcomes (i.e., does not induce players to deviate in the communication phase) if and only if that network satisfies our conditions.

Keywords: Communication, Incentives, Principal Agent, Information Transmission, Networks, Correlated Equilibrium, Communication Equilibrium, Secure Communication

JEL Classification: C72, D82, D83, D23

Suggested Citation

Rivera, Thomas, Incentives and the Structure of Communication (November 16, 2017). HEC Paris Research Paper No. ECO/SCD-2016-1141, Available at SSRN: https://ssrn.com/abstract=2737288 or http://dx.doi.org/10.2139/ssrn.2737288

Thomas Rivera (Contact Author)

McGill University ( email )

1001 Sherbrooke St W
Montreal, Quebec h3A 1G5

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