Cheap talk, efficiency and egalitarian cost sharing in joint projects

Agastya, M., Menezes, F. and Sengupta, K. (2007) Cheap talk, efficiency and egalitarian cost sharing in joint projects. Games and Economic Behavior, 60 1: 1-19. doi:10.1016/j.geb.2006.09.005

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Author Agastya, M.
Menezes, F.
Sengupta, K.
Title Cheap talk, efficiency and egalitarian cost sharing in joint projects
Journal name Games and Economic Behavior   Check publisher's open access policy
ISSN 0899-8256
Publication date 2007-07
Year available 2007
Sub-type Article (original research)
DOI 10.1016/j.geb.2006.09.005
Volume 60
Issue 1
Start page 1
End page 19
Total pages 19
Editor E. Kalia
Place of publication San Diego
Publisher Academic Press
Collection year 2008
Language eng
Subject C1
14 Economics
Abstract Rarely, if ever. do parties contemplating a joint project commit resources without engaging in nonbindin- discussions about who does what. To examine the role of such discussions, we model the investment decision as a voluntary contribution game where each player is privately informed of her benefit from project's completion. Efficiency of every equilibrium of this game is improved when a prior stage of communication is allowed. Interestingly, this improvement can be achieved in "simple equilibria" where a player simply announces whether (not how much) she plans to contribute. With symmetric priors, the simple equilibrium that maximizes either utilitarian ex ante welfare or the probability of completion has a curiously egalitarian feature-whenever the project is completed, each party contributes exactly half the cost, independent of private information. (c) 2006 Elsevier Inc. All rights reserved.
Keyword Economics
voluntary contribution mechanism
incomplete information
cheap talk
simple equilibria
Q-Index Code C1

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
2008 Higher Education Research Data Collection
School of Economics Publications
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Citation counts: TR Web of Science Citation Count  Cited 4 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 4 times in Scopus Article | Citations
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Created: Mon, 18 Feb 2008, 14:27:36 EST