Crying about a Strategic Wolf

36 Pages Posted: 4 Nov 2016 Last revised: 13 Apr 2018

See all articles by Aaron Kolb

Aaron Kolb

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Vincent Conitzer

Duke University

Date Written: March 13, 2018

Abstract

We analyze cheap talk warnings about a strategic adversary, with applications to national security and cybersecurity. Each period an expert receives a noisy private signal about whether attack by the adversary is feasible. The expert wants to warn a decision maker while also maintaining credibility for future warnings, but unlike in a standard cheap talk game the adversary can undermine the expert’s credibility by delaying attack. As a result, both delayed attacks and false alarms can arise in equilibrium. Delay of attack, however, can reinforce the expert's truthtelling incentive, and thus the expert and decision maker are sometimes better off when the adversary is strategic. A running theme is a trade-off between stakes and harm, and these players may be worse off against a resource-constrained attacker. We highlight the importance of commitment power and observability in defending against attacks.

Keywords: Repeated games, cheap talk, economics of information, national security, cybersecurity

Suggested Citation

Kolb, Aaron and Conitzer, Vincent, Crying about a Strategic Wolf (March 13, 2018). Kelley School of Business Research Paper No. 16-69. Available at SSRN: https://ssrn.com/abstract=2863907 or http://dx.doi.org/10.2139/ssrn.2863907

Aaron Kolb (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States

HOME PAGE: http://https://sites.google.com/site/aaronmkolb/

Vincent Conitzer

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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