Communication, Renegotiation and Coordination with Private Values (Extended Working Paper Version)

Abstract

An equilibrium is communication-proof if it is unaffected by new opportunities to
communicate and renegotiate. We characterize the set of equilibria of coordination
games with pre-play communication in which players have private preferences over
the feasible coordinated outcomes. Communication-proof equilibria provide a narrow
selection from the large set of qualitatively diverse Bayesian Nash equilibria in such
games. Under a communication-proof equilibrium, players never miscoordinate, play
their jointly preferred outcome whenever there is one, and communicate only the ordinal
part of their preferences. Moreover, such equilibria are robust to changes in players’
beliefs, interim Pareto efficient, and evolutionarily stable.

Keywords: cheaptalk, communication-proofness, renegotiation-proofness, secrethandshake, incomplete information, evolutionary robustness

JEL Classification: C72, C73, D82