Affiliation: McMaster University
Title: "Mediation is Cheap Talk", (joint with Maria Goltsman and Gregory Pavlov from Western University).
Abstract: The paper establishes the ex-ante payoff equivalence between cheap-talk equilibria and optimal mediated equilibria in the framework of Crawford and Sobel (1982) if the conflict of interest between players exceeds any of a specified infinite set of thresholds and the distribution of states satisfies the regularity condition. The results are based on a novel technique for mediated equilibria that constructs pairs of the sender's threshold payoff functions coupled with signed measures on subsets of types, which include cutoff types and newly introduced ideal types. These pairs determine the receiver's ex-ante payoff in cheap-talk equilibria, which serve as the upper bound on the ex-ante payoffs across all mediated equilibria.