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Philip Reny is The Hugo F. Sonnenschein Distinguished Service Professor in Economics and the University of Chicago.
TOPIC: Natural Language Equilibrium II
ABSTRACT: In a previous paper entitled “Natural Language Equilibrium I,” we studied the effect of a commonly understood language on signaling-game equilibria under the convention that off-path statements are interpreted as true unless they can be seen as a rational attempt to deceive. With this convention it was shown that, generically, only stable equilibrium outcomes can arise. Here, we strengthen the convention by also requiring that any statement must be interpreted as true unless doing so would make the statement a rational deception. In contrast to the earlier paper, this strengthening refines equilibria in pure communication games and has a simple language-evolutionary motivation.
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