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# Rational and Boundedly Rational Behavior in a Binary Choice Sender-Receiver Game Author(s): Massimiliano Landi and Domenico

Colucci Reviewed work(s): Source: The Journal of Conflict Resolution, Vol. 52, No. 5 (Oct., 2008), pp. 665-686 Published by: Sage Publications, Inc. Stable URL: http://www.jstor.org/stable/27638633 . Accessed: 04/12/2012 10:57

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Journal of Conflict Resolution Volume 52 Number 5 October 2008 665-686 ? 2008 Sage Publications

Rational

Behavior

Massimiliano

and Boundedly Game

Rational -

io-h ?

*

!*,?

Sender-Receiver

Landi School ofEconomics Singapore Management Domenico Colucci

in a Binary Choice

http://jcr.sagepub.com

^,^,^1

University, Singapore

**Mathematics for Decisions Department of University ofFlorence, Italy
**

The sent by Osama bin this situation as They model a signaling game a population in which of receivers takes a binary choice, the out come is decided by majority and sender receivers have rule, interests, and conflicting there is uncertainty the about both players' degree of rationality. They characterize authors the strategic rationale investigate on the eve of the 2004 U.S. Presidential behind the message elections. structure of the sequential of the game as a function of the parameters gov equilibria the uncertainty and find that in all pure strategy equilibria, the outcome most of the above-mentioned preferred by the rational sender is chosen. An explanation events relies crucially on the relative likelihood of rational and naive players: If a suf erning is posited, then our model ficient departure from full rationality of the electorate sug succeeded that bin in Laden's message gests tilting the race toward his pre-electoral preferred outcome. Keywords: cheap talk; elections; bounded rationality; terrorism

Laden

The

weekend before the 2004 U.S. presidential elections, the Al Jazeera TV network aired a videotaped address fromOsama bin Laden (OBL, henceforth)

the American people. Apparently the message was not about the impend

targeting

**ing elections (Al Jazeera 2004):
**

of America: People another Manhattan, This

talk of mine

and deals with

the war

is for you and concerns the ideal way and its causes and results.

to prevent

The timing of the message and its very ending though, leave littledoubts about the fact that itwas indeedmeant to influence theAmerican voters. Quoting again from the message (Al Jazeera 2004):

Authors' Note: We thank Vincent Crawford and Domenico Menicucci for discussions and comments

on this article.

665

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By reminding us of 9/11 and invoked the only thing that could trump Iraq?and terrorism. Nevertheless. to ascertain several reelect whether or not the message agreed Bush. and the recollection of the facts of 9/11 would tend to substantially displace votes fromKerry to Bush. but this is not strictlyrequired to build the we answers to seek the Did OBL really misun Ultimately. I tell you in truth. the authors conducted an experi ment. using behavior. following questions: an external significant outside personalities or organizations endorse (more or less explicitly) one candidate is surely large. Re-enter Osama bin Laden. put Iraq in per to the President's and played precisely success and strength?success and was never one to in Baghdad. of Kerry. Kerry. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . and children for the sake of the squander his security. (2005): in late September 2004. He understand 9/11?and he pulled his spectacularly misjudged nemesis over the finish line. helping President Bush's reelection. OBL's role and his message's timing. helped commentators George W. sing JohnF.666 Journal of Conflict Resolution The wise man liar in theWhite the hands doesn't House. a significant conclusion there are no direct impact on the vote. that your security is not in nor Bush.82. (p. bin Laden the President. and echo in the general elections. Another is subcommander Marcos's endorsement. These find sortie in the closing days of the campaign might have ings suggest thatOBL's affected the vote. election (opposing Bush and endorsing Kerry) a lie or a truthful revelation of his view? Did theAmeri can voters OBL's by give message any credit is an example to the message? to influence of an attempt the result of an election a costless The number of cases in which message. the campaign some improbable awaited hanging to tip the scale. Your security is in your own hands. So we take it as a working hypothesis that the tape indeed influenced ballot showing that a shift in the public's attention onto themes such as terrorism derstand theAmerican voters?Was his implied position on U.206 on Tue. In conclusion. Berlusconi (pictured as unfit to lead Italy) before both the 2001 and the 2006 Italian personality national television in May 2006. ways However. of one of the candidates for the incoming presi dential elections inMexico. 50) spective A piece of (admittedly indirect) evidence supporting the above view can be found in Cohen et al. wealth.1 For on had the Unfortunately. quoting fromKrauthammer (2004): With the election actually exam development the war on save in the balance.S. that the message ple. The interpretationof ourmodel also benefits from assuming that the face value of OBL's words boiled down to opposing George W. An example is the Economist's tough stand on Mr. This is corroborated by pre-electoral polls that found Bush to be clearly favored over Kerry in handling terrorism (Campbell 2005). Bin Laden strength that he so squandered remotely the American mind. No. nor al-Qaida. media make it a rather novel event in the political scenery content. on This content downloaded by the authorized user from 192. Bush and hence endor model. His chilling reappearance reminded us of our peril.168.

the toward control that can Islamic is poor: conditions that drive U.S. if a sufficientdeparture from full rationality of the electorate message is assumed. choose the action that. voters. determines the payoffs for all players. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions .because story for a two-states This content downloaded by the authorized user from 192.2 We consider a game ? la Crawford and Sobel (1982) played between one sender and a population of receivers. succeeded then our model the race supports toward the idea that OBL's he preferred.Majority rule determines the choice implemented. the sender uses only uninformative messages of Bush. Under this setup. a guide to shed lighton things. it iswell known that sender and receivers have opposite interests. and OBL Conversely. togetherwith the prevailing state.but this is hardly a way to avoid difficulties. for an explanation that should be anchored on empirically credible initial responses' behavior. Nonetheless. In a "high" state. the outcome most preferred by the (rational) sender is selected. which. The uncertainty for both receivers and sender about the degree of sophistication of their opponent induces a game of incomplete informationwhose The interpretationof the events relies crucially on the relative likelihood ofmortal and sophisticated players. we introduce a structural model of interaction and behavioral that resembles rational Crawford's (2003) between fully players to the mislead Germans of the Allies' successful about where they attempt analysis would land on D-Day in 1944. These find ings extend the results of Crawford to our case.206 on Tue.OBL a risk of a terrorist attack. take The a sender has private information a about a state vari from able while the receivers binary action after observing public message the sender.82. ex ante. as a bet pol a less aggressive foreign icy. maximizes case. from the point of view of theAmerican electorate.S. national security. With respect to thementioned contest between OBL and U. play.While Crawford considers the transmission of infor mation about intended information. prefers Kerry as a proxy for the (exogenous) seriousness of OBL's imminent threat to is strong and influential and theU. Colucci /Binary Choice Sender-Receiver Game 667 and calls. This being the votes in favor To account for this possibility.S. in our opinion. pr? ?lectoral in tilting the outcome equilibria are studied as a function of the parameters governing this uncertainty. voters we have in relative be explained as follows: Let the state of the world represent OBL's on as a influence Islamic Mid leader and his communities in the terrorist strength dle East and worldwide. voters U. higher perceive ter option. As a result. we focus on the transmission of private exogenous mind can The strategic interactionbetween OBL and theU. citizens prefer a foreign policy more cost them less. in all the pure strategies equilibria of the game. OBL's message could not have shifted in any equilibrium. This can be seen.S. and the receivers their expected payoff. they see Bush U. OBL masses is relatively weak This makes the angered in the sense that his outlook for him prefer aggressive al-Qaida.S. U.S. In a "low" on create state.S.Landi. scenario is inevitably rather arbi probably as a better one might thinkof resorting to thehistorical events as of 2004 Election Day as trary.168. In the benchmark case. and see Kerry Insofar as our motivating inclined toward diplomacy thatwould alternative. Vice policies versa.

pool of receivers (who may be partially naive) inwhich talk can be inherentlycostly. 1995). Stahl andWilson 1994. learning or reputation considerations. and Chen (2006). Clearly.g. the novelty of the scenario does not leave room for approach out thepossibility for testing the play ofmixed strategies. at the bottom of the scale. players form some simplified beliefs about their opponents' play and then best lar concepts that are typical of equilibrium reasoning. and Squintani (2006). believe and clearly. and Chong (2004) also shows good fit to empirical data from various types in a series of two-person normal-form games in Costa with possibly boundedly Related research on transmission of private information rational players includes Kartik. a finite matters. One step respond to that. The experimental games. was on the game natural candidates' In this only positions respect. e.82. as this given the idiosyncratic nature of the events. by the true state of the world. In fact. At no the time of the message.S.3 We therefore assume that each player is either rational or naive. as in Nagel (1995) and Costa-Gomes and Crawford (2006). The same lack of repetition Rational rules play the incomplete information game that is obtained by introducing the possibi lity of naive players and follow the standard equilibrium behavior. it is a sensible assumption between voters. These players are naive in the sense that they do not use the circu players above is the class of level 1 receivers: They believe the population of sender to be formed by level 0 players only and therefore choose the strategy that is a best response infinite to that. first group of authors considers a communication game between a sender and a This content downloaded by the authorized user from 192. out time for changes to focus available. Ho. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions .. only an a of behavioral types. level 0 players.206 on Tue. behavior in experi Examples beyond theworks previously cited include first-round mental guessing games.There is no loss of generality in restrict ing our analysis only to them. OBL were we and spelled that the U. Gomes.168. since from the point of view of the rational players. Different levels of sophisti cation imply different types of expectations. such as Sobel (1985) and Benabou and Laroque (1992). The state of the world is a continuous random variable with an unbounded support. and estimated finite number of them behave differently. Ottaviani. Naive players are built following the logic of level-k thinkingmodels that appear in the beha vioral game theory literature (see. and Broseta (2001). unlike similar applications of strategic information transmission. Thus. whose behavior who is determined reveals the level 0 player is a sender an exogenous In our motive. Moving sequence one step above in a recursive since we way. Crawford. We choose tomodel seems quite the type of uncertainty following Crawford (2003). it is only theirbehavior that Such a structure of boundedly rational decision rules has been shown to be a well-grounded starting point for modeling initial responses to novel situations.668 Journal of Conflict Resolution itwould require some kind of counterfactual analysis for which scientific grounding is hard to find. we have case. In a nutshell. The related model of cognitive hierarchy developed by Camerer. have we can generate game.

in particular. complex structure in Chen. The article is organized as follows: Section 2 discusses themodel in its general form. we the sender's theirs also extend our model to allow formore examples from real politics to fit in our framework. This part is akin to Sobel (1985) and entails that the receivers face an additional level of uncertainty in choosing what to do. Let S {S\. we allow for and action spaces. relation Section between 3 extends sender the model and to account Section for uncertainty 4 concludes. who mix between abstaining and voting for the candidate with less partisan support. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . and receivers. S\ and S2. there is a substantial difference: The behavior of the sophisticated players in our model is When the prob purely driven by their strategic interactionwith their counterpart. a is sender the of sufficiently high.206 on Tue.168. The distinctive feature of our model about players' degree of sophistication. Majority per change the outcome with respect to the one is in the addition of uncertainty The role of the sophisticated receivers mirrors the equilibrium play of the unin formed independents in Feddersen and Pesendorfer (1996).82. the sender's that. Yet. Suppose there are two states of the world. to counterbalance the play receivers. Our article is mainly motivated by the interest in the episode of OBL versus voters at the eve of 2004 elections and thereforeposits a clear clash in the interests of those actors. a sender state the of the who knows world. Colucci /Binary Choice Sender-Receiver Game 669 Chen is similar but has a state that is uniform in [0.M2} to who do (P2).Landi. and the message the outcome is not addi is is receivers.p and 1 p.message. 1] and assumes nonstrategic types of players who are in fact optimizers given theirutility functions (so there is actually no bounded rationality in her model). not The know it. and a population (continuum) of receivers (PI). in the sense that a more Moreover. whose probabilities are. positively The Base Model ? = respectively. ability sophisticated sophisticated receivers need which to vote requires so that the electoral them outcome does not depend of the mortal on the signal observed. se does not (1989). sender sends a public message m eM = {m\. where the sender faces in our case. by majority Our model also relates to Farrell and Gibbons two different public and receivers. the outcome rational of boundedly is not determined types for both sender rule. Besides the finiteness of the state. cannot be The sent main differences are to only one subgroup rule. about the payoffs cor receivers. the present article differs from both. This content downloaded by the authorized user from 192. so that. of determined tively separable in the actions of different groups within the population of recei vers. (some Because events whether of which the analysis are mentioned payoff and might above) are be relevant where negatively voters may or to interpret other similar not be certain about correlated. There are two groups of players. to increase the probability that the informed independents be pivotal to the election. by majority rule payoff receiver case. S2}.

three-dimensional simplex with respect to the set of pure strategies {(mi.(D. ^2). (oci. the sender and the receivers have A pure strategy for the sender is a function from the state of theworld space (S) to themessage space (M). 0. mi).5. For assigns (m2. who in turnchoose an action aeA ? {U. m2).D). pi p^ pn Urn b-b 0. t/). probabilities and the sender's 0. (mi.82. and strategy 0. Finally let jidenote the posterior probability that the true state of theworld is S\ after observing message mj and r\ the probability that the state be Si given m2. example. ?4) denotes an ele ment of the three-dimensional simplex with respect to the set of pure strategies {(?/. mi). (U. m2) denotes the pure strategyby which message m\ is sent if the state is Si and message m2 if the state is S2. m2). Notice that. whenever possible. We use conflicting interests. S^ 0 pn Urn Dm 0. A pure strategy for the receivers is a function from the message space (M) to the action space (A). to the pure strategies (mi.670 Journal of Conflict Resolution Figure 1 the Actions Given (Um and Dm) of the Payoffs Majority of Receivers and the State of Nature (Two States). 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions .t/).4 (0. (^2.5. 0. mixed 0. ?3. 1.1.(D. 0C4) denotes an element of the (m2. The payoffs for all players depend on the state of nature and on the action of (themajority of) the receivers and are reported inFigure 1. Mixed strategies are probability distributions over the set of pure strategies. in each state.168. 0. ^2)}. the following notation: for the sender.-1 0 receivers. So both types of players have four pure strategies.D}. Similarly.206 on Tue. with b > 0. In what follows. ^1).D)}. These probabilities depend on p and on the strategy adopted by the sender. (?]? ?2. D) denotes the pure strategy that prescribes choosing action U if themessage is m\ and action D if the message ism2. (mi. and are computed. mi).(i/. through Bayes' rule as follows: p(oLi+ a2) p(ai +a2) + (l-p)(ai _/7(0C3+a4)_ +a3) (1) (2) + (l-/?)(oc2 + a4) /?(a3-r-a4) This content downloaded by the authorized user from 192. ot2.4) means that the sender (m}. for receivers. 0C3. Similarly. (^2. 0.1.

Indeed.e. D).m\). receivers are indifferent between U and D.e. Therefore.+ ?2< l/2 strategy for which a2 ^ oc2 > 0C3: the receiver respond playing would Proof. respec tivelyD (i. m\). theymix in such a way to induce U (i. This restriction ismotivated by the need to reduce the set of equilibria. of the realiza be one tion of the state of nature) partisans pivotal would we of both to into the picture. suppose then optimally same The choose logic (U. which violates a2 = 0C3. Colucci /Binary Choice Sender-Receiver Game 671 In the remainder of this section.. true state 1. We have in mind a scenario in which. size. irrespective a close election independent case. Under full rationality. In the sequential equilibria of the game between rational sender and does any not reveal information about the strategy that induces an electoral outcome that does not depend on the message are such that the sender the strategies = choose 0C3) and the receivers (i. + ?3< 1/2.We use this condition as an approximation of the idea of a close race. A best receivers' posterior probabilities on the state equal the priors (see equations 1 and 2). the following result (which is very much in the spirit of Crawford and Sobel 1982) holds: Proposition receivers.. sides are of equal Therefore.we firstdescribe the equilibria of the game with only rational players..+ ?2> 1/2 ?. and ?. + ?3> 1/2..e. a2 < ?2+ ?4.82. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . for whom ours one is a model option of swing than voters.or ?! + ?2= 1/2=?2+ ?4) ?. in such outcome the action would of the outcome. as it was the case in the 2004 presidential election. to have receivers In this case. + ?3 1/2 if and only if ?2 + ?4 1/2. before the message is con didates. which means that. we can dismiss the possibility that receivers mix so that ?i + ?2 < 1/2 and ?1 + ?3 > 1/2. One could add partisan could voters voters citizens is better the other. be In this respect. Likewise. ex ante. The The solution symmetry concept condition we work on all is that of the rational symmetric receivers sequential to adopt requires equili the same (pure ormixed) strategy. ?j + ?2 > > or 1/2 $2 + ?4> = oc2 either 0C3 cannot be part of an equilibrium. which is typically large in voting games.e. Finally. As even a result. ?i -f?3 < 1/2):The sender's best response would be (m2. ?i + ?2= l/2 ?. + ?2< 1/2 > < ?2 + ?4. oc2 ^ 0C3 or 0C3.5 brium.Having ruled out receivers' strategies indu cing outcomes that change with themessage. then introduce bounded rationality along the lines of Crawford (2003) and look at the equilibria of the game between the sophisticated players. voters are indifferent between the can that ph?\?p.e.. ?j + ?2 > 1/2). where still pb?\?p Finally. Suppose that on observing m\. Given would 0i2 = 0C3. (rri2.206 on Tue. observe that?. In all these This content downloaded by the authorized user from 192. whom are thereforeequally plausible to be elected. still be needed the electoral choose the assumption ex ante uncertain.Landi. the expected payoff fromchoosing either alternative in the election is the same. respectively ra2. the sender oc2 <a3. Consider a mixed strategy for the sender: (i. rules out In turn. (i.4 that maximizes assume that their expected payoff as if theywere pivotal in the election.168. We shall assume veyed. we are leftwith three possibilities: = and ?.

4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . or a sophisticated type. ifwe believe that the message we need to look for alternative sent by OBL frameworks.and sophisticated types.82.D) (D. For the receivers who believe the sender is a liar and therefore mally choose (D. Similarly. and ys denote from equilibrium the population's considerations. yz.m\) inverter (D. the message Their choice. there is no loss of generality in focusing our attention on the following pairs of types of sender-receivers:6 example.672 Journal of Conflict Resolution cases. who may be fully rational (and we call them "sophisticated") or follow a behavioral norm of conduct (and we call them "mortal"). the sender with is indifferent a2 = 0C3.w2) < 1. the structureof the game (payoffs. then a sophisticated receiver's best response is given by (U. Letting w." Notice thatother pairs of behavioral types could emerge. inverters. and receiverswho believe the sender does so would optimally choose (<7." A senderwho thinks thepopulation of receivers ismade only of believers and thereforeoptimally chooses (m2. between sending any message in each state and there fore can mix Proposition ests. Therefore. Iteration of best level responses 0 who sender expect generates always the sender the set of behavioral chooses (mi. D) are called "believers. had an impact on the elec The one we propose is the toral outcome. following: Players are assumed to be unsure about the degree of rationality of their opponents.206 on Tue. respectively. sent does with not have any impact whatsoever remains in the or without any message. U) are called "inverters. a sender who believes that receivers are all inverters truth-teller (rai. y^. We "truth assume The that a this type a therefore players have naive teller. strategy. To understand how sophisticated players will behave in equilibrium.believers). vote.m\) is called a "liar. given that This content downloaded by the authorized user from 192. so their choice at the voting stage is not affected by it. We to be a types we call con sider.ra2) believer (U. Sophisticated players are rational in the standard sense. ?>). a truth teller. opti would optimally choose (mi.Thus.U) ifxs(l+wi -w2)>l-2xt.2xt. and their behavior comes liar. be the probability that the sophisticated sender sends mes sage mi in state S?. ifxs{\+ wi ." Last. we need the following two intermediate results: Lemma 1.D) liar (ni2.168. and xs denote the probability a sender is.and uncertainty about types) is common knowledge (among sophisticated players). Mortal beliefs about the distributionof opponents and maximize theirexpected payoff given those beliefs. xi.m2). As a result." receivers truth teller and optimally choose (U. but their strategies are indistinguishable from the firstpair of mortal types (truth tellers. receivers 1 implies thatwhen players are rational and have conflicting inter do not change their priors upon receiving the signal. share a of believers.U) Let xt. the same. m2). given the initial uncertainty about the best way possible receivers action.

Now observe that ^ + ?*+:y/ + (l-?)* In state S2. Therefore.Landi. let ? denote the probability of the sophisticated recei ver playing (?/. 1? ?. p(xt + w\xs) and (1 ?p)(x\ + W2XS). is best. message m? is best whenever = l.v(1 + w\ ? w2) > ? 1 2xt. Therefore. This content downloaded by the authorized user from 192. the probability of being in state S] and S2 is proportional to.(4) whenever neither equation 3 nor is obtained equation 4 hold. upon observing message m2. The sophisticated sender's best response to (0. Lemma 2. if a. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . respectively. The sophisticated sender knows that (U. D) or (D.206 on Tue. U). ? w2)xs. Colucci /Binary Choice Sender-Receiver Game 673 Proof. whereas (D. + fys) of thepopulation. Upon observing message m\. that is. (3) yi+ (l-P)ys< Last. U). indifference between m\ and m2 -<yb + Vys. the only possible configurations are (mi. A sophisticated receiver will choose the action maximizing his or her expected payoff.mj).168. 0) is given by (mi. and the former is optimal whenever in state S\m_? while the latter is optimal whenever the opposite holds. if 1 )xs > xt + (1 w2)xs. ?.82. 2xt > (1 + w\ Observe that the only pure strategybest responses for the sophisticated receiver are (U. if $ys> 2 - ~yb -yh Proof.m2) (m2. respectively. m2) and (m2. p(xt + (1 w\)xs) and (1 ? p)(x\ + (1 ? W2)xs). the probability of being in state S\ and S2 ? is proportional to. since ph?\? p.D) and 1? ? theprobability of playing (D. while m2 is best if ?>'v<^<^- + (l-?)Xv. D) will be played by a share ? + (1 ?)v?). U is optimal under m2 if Xi+(\-W\ ? that is. There fore. Similarly.mi) < if ?jy. message m\ is best if + >'/. U) will be played by a share (y? (yb Thus. U is optimal under m\ if Xt+ W\Xs >X\ +w2xs. in state S\. Therefore.

yb}. 1/2 y&.m2). whether it is about the receivers or about himself or herself.D) requires ys given w\ 1/2. jt/. -. implying 2x5 1/2.206 on Tue.-}. EQ EQ EQ EQ 1 : [(m\.Last. Assume 1/2 maxj^. y. they the the receivers ing majority. for [(mi. the outcome favors a liar only in Equations 2 and 4. 2. In the tial equilibria. the outcome induced is still the facing sophisticated sender is smaller than 1/2. The following proposition covers all in the position to characterize the play the in the pure > strategy sequen which is tackled in proposition 3. D)] to be an equilibrium means (mi. Whenever the population share of one mortal type of receiver is larger than 1/2 (equations 1 most preferred outcome by fool and 4). U)} are as follows: if and only if and only if and only if and only if y? > if y? < if yb < if yb > and x? < andxr > and x? > and xt < -. which m2). since theprobability of a Yet. observe that. yb. Although sophisticated cannot affect the outcome because they represent a minority of the voters. (D.m\ ).as a quick glance at the best response functions suggests.}. U)\ Furthermore. [(m2. Here. = < > that is and that is best 1. y. the sophisticated sendermimics the strategyof the least likelymortal and fools the sophisticated recei vers.674 Journal of Conflict Resolution We are now tial equilibria of the game between sophisticated players. m2) is best given ?=l. It remains to consider the case where is inmixed strategy. In the sequential equilibria of the game between sophisticated pure strategies (U. Proposition 2 shows that the (sophisticated) sender can take advantage of the uncertainty.168. [(m\. (?/. For example.7 Proof. when sophisticated receivers count (equations 2 and 3). most preferredby the sophisticated sender. -.D)} (U.m\).yb. the sophisticated sender can just induce the are acting optimally. x?.m2).D)\ (D. Proposition sender and parameters' configurations except case 1/2 max{x?. and there is a probability of at least 1/2 that the sender is a mortal type.from thepoint of view of a mortal sender. The proof uses Lemma 1 and Lemma 2 above. the majority of the receivers are acting optimally.w2 = 0. the outcome preferred by the sophisticated sender is achieved in all those equilibria. y? (?/. sophisticated senders need to make sure that no transmission of 1/2 > max{x. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . The equilibrium This content downloaded by the authorized user from 192.82.. receivers. The result is as follows: > mixed strategies sequen Proposition 3. On the other hand. < cases are same > that is The other done in the x/ \?2xu way. jc/. -. y?. 2 3 4 : : : [(m2. while it favors the truthteller inEquations 1 and 3.

that the sender is (known to be) sophisticated (i. First. xs a and plays against population of mortal and sophisticated receivers.]' + p[x? fa + U4)XS] ' + a4)xj + (1 . and that does the not receivers depend choose any strategy (i. When either mortal type con the This content downloaded by the authorized user from 192. *(?i ^(?i + ?2) > V2 -yb> y s (?2 + ?4)> or ys (?i + ?2) < = + ?2)=V2-^ v.+?3) < z < > -. The equili brium the players' population.when sophisticated players are pivotal. the sender plays the strategy that fools this type while play depends on the share of mortal receivers. players. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . our analysis can be carried forward to polar cases. the equilibria change continuously with respect to the composition of = 1) Suppose.(?2 + ?4)).e. the probabilities about the state of nature have to be left unchanged by the message. Second... for example. = |i r| = p For the sophisticated receivers. z > *(?i + ?2) < l/2-^<^(?2 > + ?4). As a result. when the share of the latter goes to 1. we need one of the fol lowing cases: ^+*(?i which is equivalent to + ?2) > ? andy/+yJ(?. irrespective of themessage. Observe that in equilibrium.e. the sophisticated receivers need tomix in a way that (if the electoral outcome is tobe U).168.206 on Tue. when the shares (probabilities) of mortal players are equal. Thus.p) [xt + (a2+ a4)xj p[xi+ (oc3 if and only if xt + U2XS = x\+ oc3x5. for otherwise nonequilibrium behavior would result. (ai +0C2K]_ + + + (1 -p)[xi + (<xi p[xt (cLi cl2)xs] +oc3)x. the equilibrium under full rationalityis the limitof theequilibrium with mortal and sophis ticated In general. itmust be that the electoral outcome does not depend on themessage observed (otherwise. they mostly add to thebelievers when m 1 (so thatys when m2 (so that ys (?2 + ?4) + yb< 1/2). the two equilibria coincide.e.or equal 1/2. (?i + ?2) + yb > 1/2) and to the inverters In fact. This is because the twomortal typesperfectlyoffset each other. or the message Proof Inspection of the best response functions depicted in Figures 2 and 3 shows that.Landi. Therefore. the equilibrium has to be in mixed strategies. stitutes a majority. Note that ~ ? Tft + _p[x. Thus. 1/2 - on yb< ys (?2 + ?4). electoral = oc2 ^j^1 outcome + 0C3).82. fall short. which means that the share of the population choosing U must exceed.. this equilibrium resembles the one under full rationality (see proposition 1). the sender would have a profitable deviation). Colucci /Binary Choice Sender-Receiver Game 675 information that induces occurs an (i.

This content downloaded by the authorized user from 192.=i i tf=1 sophisticated receivers will play like the other type (see equations 1 and 4 in propo sition 2). ifwe think thatOBL was not only capable of mastering the game but also perfectly knowledgeable about American politics (in other words.S. thenwe can regard the final comment inKrauthammer (2004) thatOBL played against himself throughhis message as unrealistic.82. Indeed.676 Journal of Conflict Resolution Best Responses Figure 2 to Pure Strategies for the Sophisticated Sender y*=i i 2 y. either believers (in which case OBL was lying) or inverters (in which case any specific interpretation to states and actions.206 on Tue. For example.168. If. to be we are with themixed strategyequilibria of proposition 3 inwhich the sender's strate left plifies the strategic interaction. even without attaching (very likely) sophisticated sender entail the deception of a majority ofmortal recei vers. So assuming a sender who is known rational sim fied model of the game that actually took place between OBL voters. The introduction of behavioral types causes the appearance of pure strategy are rational. on down the other to oc2= hand. the pure-strategy equilibria with a rationality. Depending on one's on the nature of OBL's and theAmerican various dif ferent conclusions can be drawn. elections according gies boil 0C3. OBL was telling the truth). We can see how our analysis offers to a simpli a to evaluate of 2004 U. ifwe believe OBL was very likely to be fully rational). 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . the sophisticated receivers are in majority. inwhich the equilibria that do not exist when all players considered outcome framework favors the (sophisticated) the happenings views sender.

168. This content downloaded by the authorized user from 192. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions .82. under some states of the world. So far. we extend the base model tainty about the correlation between sender's and to explore the possibility of uncer receivers' payoffs. with As a of examples. voters whatever would have avoided their mortal counterparts to be the true state of the world. we investigate the case inwhich the sender may have interests that. Colucci /Binary Choice Sender-Receiver Game 677 Best Responses xf=1 Figure 3 to Pure Strategies for the Sophisticated Receiver 1 2 \ On the other hand. likeKrauthammer (2004) suggests. we point out that voters they framed are perfect negative inwhich things are more nuanced than in the may introduction.206 on Tue. Yet. not know partially) model than there whether the same. ifone believes that. one can think in the sense at odds need or and-white to be (perhaps in a wider Therefore.Landi. Assume. the sophisticated fooled by American the message. in the next section. A Model withUncertainty about theSender's Interests In this section. are of uncertainty the sender's scenarios 2004 message.8 the above. can be an extra their Less interests black payoff correlation. OBL was naive about American politics. coincide with those of the receivers. beside OBL's our base layer and model permits. thenwe should look at the equilibria inwhich the sender is most likely a liar or a truth teller: Under those circumstances. our model depicts the case inwhich the interaction between sender and receivers is clear cut.

1 P1 0. and a strategy for the sender is a state Si. S2. Moreover.0 1.-1 P1 1. In turn. and action D if message ism2. which we adopt as our metric for a close election. but we have restricted attention to the case where both alternatives the same payoff to both players.168. message For example. D) means that the receiver chooses action U if denote the posterior belief about mi.D}. payoffs as a function of the states and of the receivers' actions are reported inFigure 4. This content downloaded by the authorized user from 192. 1. m\.206 on Tue. let^(r^) state Si when signal mi (m2) is observed. We suppose ing two inequalities hold P2+P3 P2+P3 > P\ +P4. <P\ +/?4 (6) (7) Inequality 6 means that the sender ismore likely to have positively correlated pay offs with the receivers (we call him a "friend"). aeA = {U.m2}.82. S 4} and let/?/ M = {m\. Remember that these probabilities depend on pi and on the strategy adopted by the sender and are computed by Bayes' rule whenever Players' possible. give (5) further that either one of the follow meaning there is ex ante indifferencebetween the two candidates. that the state space is S = {S\. whereas inequality 7 means the sender ismore likely to have negatively correlated payoffs with the receivers (we call him an "enemy").1 P1 0. m2. Last. and a strategy M toA. S. (m\.9 Receivers choose an action. Compared to the previous model. In what follows. The message space is still function from S to M. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions .0 be the probability of therefore.678 Journal of Conflict Resolution Figure 4 the Actions Given (Um and Dm) of theMajority Payoffs of Receivers and the State ofNature (Four States) P1 F2 Un 1. (U. 0 0. we assume that P\ +P2=P3+P4. m2) S\ and S2 denotes the where is mi in states and m2 in states message is S3 and S4. Notations for pure and mixed strategies for the receivers is a function from follow pure the logic strategy of the previous the sender's section. note that inequalities 5 and 6 imply thatP3> p\ whereas inequalities 5 and 7 imply thatP3 < p\ and P2< Pa and p2 > /?4. S3.-1 0 0. we have added complexity to the payoffs structure.

m2. theyknow thatS2 is less likely to be the true state than S3 or S4. ra2. not want The receivers' his or her proposed strategy. a strategy to messages where cannot Equili be There corresponds two. the former case.{Sj. U) when the sender is a friend. D) when the sender is an 6 holds). there cannot exist partially revealing equilibria that induce Pl. In suppose the sender chooses (mi. S3} and {S2. posterior prob for the sender induce is a friend as well the nature abilities on S thatgenerate one of the following partitions of S: P? = {S} P2 = {{Si. S4}. egy for example. and (U. Si.whereas (jTi2. the sender would verify that all the other possible rather pick partitions of states inP2 cannot be supported as an equilibrium: Given the priors on these states.206 on Tue. a partially revealing equilibrium that induces Pl exists only when the states are partitioned into {Si. Finally. S? and S/?. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . Sj two possible messages. when m2 is sent.Landi.Moreover. wi2. and the sender is a friend (i. D). m2). that there were When such an equilibrium observe where m\. U). and receivers choose a strategy that induces an electoral out is S\. In a similar vein. the sender's pure strat is (mi. consider the benchmark case of perfect rationality. One can also easily enemy. inwhich the posterior beliefs are partitions S?. for there is uncertainty on whether the as on which action is best can for the receiver. Additionally. mi). We now can see why the initial pro posed strategy for the sender cannot be an equilibrium strategy:He or she would rather send m\ in state S4. mi). the receivers they know that the true state equal to the priors. Sup pose. Colucci /Binary Choice Sender-Receiver Game 679 This model sender Given is similar to Sobel or an enemy. any strategy inducing P2 implies that it is optimal for the receivers to adopt either ([/.Sk}}.. we give the following definition: Definition 1. corresponds one state.Sh}. are because separated there are four from the other but only states Pl corresponds and S.e. To begin with. The only case inwhich the sender does not want to deviate is the one shown above. An equilibrium is said to be pooling if it induces P? and partially revealing if it induces Pl or P2. P2 with probability states. con dition why any other partition of the best response is to choose (D. so theirbest response is (U. we can see typePl cannot be part of a pure strategysequential equilibrium. to messages bria can be usefully distinguished in terms of the partitions they generate over the state space. Like in the base model. This content downloaded by the authorized user from 192. m2. In fact. of M and (1985). mi.D) or (D. is revealed 1. come thatdoes not depend on the signal received.82.168. m\. there are pooling sequential equilibria. To this end. P? where two other to totally uninformative messages. the sender does to deviate from in the latter.

m2.m2.(D. m2).D)}. a selection issue among multiple (pure about We about meaning and signals are valued only for the information language has no intrinsic the states now their of the world to the case they convey. 2 :[(m2.U)}. in pure strategies are as follows: 1 :[(ml. the follow truth-teller liar (m\.D) (D.m\.m2. xs) receivers' To characterize the behavior of the sophisticated players.680 Journal of Conflict Resolution This result parallels theorem 1 in Sobel (1995).m2. which states that if the probabil ity of the sender being a friend is larger than 1/2. responses. Summing up. types (yb.82.m\) of is as sender's believer inverter {U. mi. in which as players in the have the same type of uncertainty and distinguish turn strategies) equilibria arise. Lemma 3.U) > (Xt if (xt + W2Xs)p2 + W]Xs)pi+ (x? + H'3Xy)p3 + (x? + W4Xs)p4. U the from ing pairs of types: he or she prefers D.206 on Tue. since between the two polar cases described by inequalities 6 and 7. and in the previous This content downloaded by the authorized user from 192. Then.m2) (m2.m\.m2). This is common in communication games. the By states iterating Consider again where best a baseline type to a truth-telling sender we prefers obtain of a sender in the the (mi. yz. The best response for a sophisticated receiver is given by (U. is an Enemy entails P4>pi and which p\ > P3.m].D) (D. x?.ml. The Sender This case opponent's rationality previous section. choosing sense that the strategy separates states where corresponds type. when condition 6 holds. besides informative and receivers do not the pooling equilibria condition their action on in which the sig are not nal. D).(U. then there is an equilibrium in which themost preferred action for the sender is revealed with probability 1. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . section. Under full rationality.m2. we have the following: Proposition messages which 4.168. letw? denote the prob ability that the sophisticated sender sends message m\ in state S? while ? is the probability a sophisticated receiver chooses (U.m{). EQ EQ These results show thatwhen condition 6 holds. there are partially revealing sequential equilibria. if (xt + w2xs)p2< {xt + WjXs)pi+ (Xj + W3Xs)pi + (Xi + W4Xs)p4.U) and and shares of The notation about probabilities ys) types (xt.

induced by message mi is pro e {2. U) is optimal if the oppo (xt (x] + W2XS) p2 site inequality holds. -. the receiver will only play either (?7.\). similarly.3} and to (x? + W{Xs)pi if / + WiXs)pi if / portional to (xt state S. In particular. mi) when theopposite inequality holds. EQ EQ EQ EQ (U.mum2. letting the sophisticated sender determine the outcome helps the receivers as well. The posterior probability of being in state S.m2).m\). the fractionof those expected to play (U.m\.D)} [(m2. -.m2. -. m2. This is due to the fact that in those states the interestsof the players are the same. the electoral outcome achieved in all those equilibria. There is a difference. in states S2 and S3.As for the sender.D)] (D.m2). whatever preferred by the sophisticated sender is the state.82. it is straightforward verify that (?/. Colucci /Binary Choice Sender-Receiver Game 681 The best response for a sophisticated sender is given by (mum2. A sophisticated receiver will choose the action maximizing expected payoff. pure strategies are as +y?. . with the equilibria in the two states case of the previous Note the high similarity section. that is when is (m2.mi) Proof.m2.m2) if $ys+yb< if f>ys+yb> ~z. l(m2.4}.m\. m2. (m2.206 on Tue. Using these G {1. U)] (U.U)] Furthermore. though: It is not true anymore that the receivers lose This content downloaded by the authorized user from 192. 2: 3: 4: l(m]. mi.m2.D) > while + wixs)p3 + (xi+ w4x5)p4 (?>.m\.D) or (D. ?_y5 < 1/2: In such case.Landi. D) will ? fall behind thatof those expected to play (?>. Then in the sequential equili bria of the game between sophisticated sender and receivers. if and only if and only if and only if and only if y? > if yh < if y? < if yh > and x? < and x? > and xt> and xt < -. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions .mi. ?7). The following proposition characterizes the pure strategy sequential Nash equi libria of the game: Proposition 5.mi.m\.m.(D.168. in equilibrium. m2) is the best strategy. whereas it follows: 1: [(m\.3} and to xt+ (1 ? Wi)xs)p? if / X[+ (1 Wi)xs)pi if / to is + w\xs)p\ + optimal if (xt probabilities.m2. (mj. Suppose conditions 5 and 7 hold.4}. U) if (yb + ?y5) < (yi+ (1 ?)yj. the G {1. having observed message m2 is proportional to probability of being in ? e {2. Therefore. anytime the outcome preferredby the sender is implemented.

We case?that is. the partially revealing pure strat egy equilibria of EQ 1 and EQ 4 in proposition 5 apply. if either of them is large enough to constitute a majority.3 =W\. when the sender is more likely to be a friend. Otherwise. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions .U) again that the most naive sender adopts (mi. m2) believer (D. U mortal liars and invertersdo not fit in the scene: This and D is best. The role of the sophisticated players in themixed strategies equilibrium is ana logous to the previous model: They need to put more probability on choosing the action that is consistent with themortal typewhose probability is smaller. for all i. If we assume best responses generates the following pair of players' types: truth-teller : (m\.10 Observe that the problem for the receivers is the same as before: They mix so that the electoral outcome is not affected by the public need to find the right signal. if the sender is known to be sophisticated. W\ =-h W4 Xs = W?. thenwe have the pool ing equilibria.m2. to be which arise whenever we need uninformative. believers play (D.206 on Tue. In fact.-}. if none is large enough so that the sophisticated players are pivotal. The sophisticated receiver's best maintaining the same naive type as in the rest of the article. mi. This condition r\i ?pi sender's requires xi-xt strategies. turn to the opposite The Sender is a Friend > P4 and 773 The sender is a friendwhen condition 6 holds and therefore/?2 >p\. For max{if.168. Also notice that is because. m2). iteration of In this case. theirequilibrium strategy is the same as in proposition 3. we between can conclude sender and that the introduction receiver does not of uncertainty alter the main about result correlation of the base in payoffs corresponds closely to the condition model now if there is at least a 50 percent chance that the sender is indeed an enemy. U) instead of (U. W4 on sender's strategies found in proposi which tion 3.682 Journal of Conflict Resolution Let 1/2 = \i? > us now turn to the equilibria in mixed message that the X]. This is because themost likely states are S2 and S3 inwhich choosing. then the structure of the equilibria depends on the relative size of themortal receivers. the best response is given by This content downloaded by the authorized user from 192. y. Therefore. yb. the conditions describing the sophis ticated players' best responses simplify accordingly: Lemma 4. respectively. H. D) as in the rest of the article. m2. Let conditions 5 and 6 hold. m 1. response to a believer type is now telling the truth.82. Having a simpler structureofmortal types. Like in the base model. Therefore.

equilibria in which messages are not informative and receivers do not con We have analyzed a model with a sender interacting with a population of receivers. As a consequence. + w4x. Proposition 6. there are (mixed strategies) pooling preferred by the sender in every state. 2 :{(m2. Similar to the enemy case.m\.m2.p4. but this does not produce any harm since there is a majority of sophisticated receivers. pure strategies are given by 1 :[(m\. and perhaps surprisingly.D)} for any parameters' if .m2). itbecomes reduced.D) (D. note that the set of equilibria does not expand when beha vioral types are introduced. when 1/2 yb}. dition theiraction on the signal.m\. The electoral outcome most favorable to the sophisticated sender is achieved in all those Remark thatEQ 2 is an equilibrium in which mortal receivers are fooled.. It is now straightforwardto characterize the equilibrium play in the pure strategy sequential equilibria. U) if (xt+ w{xs)pi if (xt+ w\xs)pi + w2xsp2 > + w2x5/?2 < {xt+ w3xs)p3 (xt+ w3xs)p3 + wAxspA. with EQ 1. (m2. Conclusion sophisticated receivers is not too large.m2. rather. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . the vote results in unanimity. and thefinal outcome is determined by majority rule.}.206 on Tue. The proof is analogous to that of Lemma 3 and is therefore omitted.168. Receivers take a binary choice.82.Landi. (D. however.m2.m2) if ?y. Then in the sequential equilibria of the game between the sophisticated EQ EQ sender and receivers. Unlike the enemy case. Let conditions 5 and 6 hold. < -. provided that the amount of having less sophistication is good in the sense that iteliminates the pooling equilibria inwhich thepositive correlation in theplayers' payoffs is not exploited.*:.> max{xt. whatever the state.m2.mi) if ?y5 > -. Conversely. the outcome is the most equilibria. This content downloaded by the authorized user from 192. Colucci /Binary Choice Sender-Receiver Game 683 (U.mi. In both equilibria. U)] {U.m\).mi. value.y?. > max {. The sender has informationthat is relevant for the payoffs of both kinds of players. The sophisticated sender's best responses are given by (m\.

generates a change in the structure of the equilibria. it is not a case of a third party's endorsement. the reader can perhaps fill in the empty usefully the rationality of the various actors to see who won and regarding to our model. This content downloaded by the authorized user from 192. such as pb > 1? p. In the and Colucci (2008). Chiappori. Yet..S. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . 2003. 5. since only the equilibria where the sophisticated receivers mix no longer exist. Walker andWooders 2001). This result also the interests of the sender carries in the case through are not at odds with those of the receivers. If the population of voters were large but finite. (radical) groups within the Isla mic communities worldwide. Although we refrain from offer on the matter. for example. OBL "pulled his nemesis over the finish line" (Krauthammer 2004).A possible alternative (and equally interesting)description of what hap OBL's ultimate intended audience was not pened can be devised ifone believes that not (or only) theAmerican public but.168. Levitt. which can be the object of further research on the topic. types depends on the definition of the level 0 players.g. 11were the "central deciding thing" in his contest with President Bush and that the release of an Osama bin Laden videotape theweekend 2. The characterization of behavioral (2005). This approach can be used for sports. e. themain structure of the article remains unaf fected. Yet." episode that fits well this picture is the strategy adopted by Jos? Maria Aznar (and voters' response in the polls) following the 2004 Madrid train bombings that eventually brought him to a working paper version of Landi of different but plausible definitions of level 0 types. for a model with initial responses. where data can be (and in fact are) gathered (see. about the sophistication of both sender and receivers. whatever there are states the prevailing in which state. and Groseclose 2002. 3. game we investigated ing personal views parameters slots our Using this framework to analyze OBL's videotape message to the American pub and OBL in a simplifiedway alongside a hidden true motivation for themessage on OBL's part. Farrell and Gibbons's (1989) model of cheap talkwith two audiences would be the natural startingpoint for the analysis. who lost according The voters the conflicting models interests between U. the outcome will be favorable for him when or her. Palacios-Huerta 4. Unlike OBL's message. presidential elections can help in tryingto rationalize a seemingly paradoxical event inwhich. Notes 1.11 In that case. On the other hand. similar to Crawford (2003). the events were so close to the elections and novel to call. Quoting fromNagourney (2005) "the attacks of Sept. according to some views. lic on the eve of the 2004 U.S. Another historic defeat in the general elections 3 days after. again. With a continuum of voters the payoff irrelevance of voters' actions can be overcome by the notion of atom proofness as introduced byMeirowitz 6. we show that themain results hold under a variety before Election Day had effectively erased any hope he had of victory. it is true thatworking under a more general assumption.684 Journal of Conflict Resolution In addition. there is uncertainty. looking at undominated strategies would do.206 on Tue.The defeated candidate himself later ascribed a decisive importance to the videotape for the out come of the presidential race.82.We find that the pure strategyequilibria of the game share theproperty that if the sender is sophisticated.

2006. Cheap talk with two audiences. Chong. Unpublished paper. Crawford. 8. N. Reasons of simplicity motivate this choice because mixed strategies for the sender are vectors in the fifteen-dimensional simplex. American Economic Review 92 (4): 1138-51. 1982. and B. J. and turnout. and J. M. Econometrica 50 (6): 1431-51. 2004. M. Sobel. Perturbed communication games with honest senders and naive receivers. This condition is presented in terms of behavioral strategies Myerson (1991) rather than standard mixed strategies as in the previous section. 1989. P. and J. 1214-23. J. V. 2006. lies. American roulette: The effect of reminders of death on support for George W. gurus. Pyszczynski. Levitt. P..aljazeera. 10.E. The swing voter's curse. Landi. C.. Osama References Al Jazeera.. A. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . in a binary choice sender and Statistics Working University Economics This content downloaded by the authorized user from 192. front pages examples of Marcos on Berlusconi. American Economic Review 96 (5): 1737-68. M. How Bush almost let it slip away. D. S. T. We are reluctant to use the expli cit wording about behavioral strategies because of the possible confusion with the term behavioral types thatwe have used extensively in the present article. R. Full speech. 2002. P. 2005. Y. Chiappori.168. Squintani. and boundedly rational misrepresentation Crawford. T. and T. Theory 134 (1): 93-116. Colucci.. The picture. Review 86 (3): Kartik. 9. and F.82.. Costa-Gomes. and G. P. S. and costly talk. Testing mixed strategy equilibrium when players are heterogeneous: The case of penalty kicks in soccer. A. Broseta. M. Ogilvie. inwhich themessage clearly signals either one of two possible candidates in an election. 2001. American Economic 2006. 1992..206 on Tue. Pesendorfer. D. Strategic information transmission.Landi. F. 107 (3): 921-58.. and R. Lying for strategic advantage: Rational of intentions. transcript of bin Ladin's (accessed October 2006). V. M. A cognitive hierarchy model of games. J. 2003. 2008. Feddersen. Crawford. terrorism. Rational and boundedly rational behavior receiver game. We equalities. We restrict our attention to generic values of the parameters and therefore do not consider the Economist's in 2006 presidential elections inMexico. 177-87. Singapore: Singapore Management University. Cognition and behavior in two-person guessing games: An experimental study. Why Bush won the presidential election of 2004: Incumbency. J.. credibility. 2005. andW.. Campbell. http://english. Crawford. Using privileged information to manipulate markets: Insiders. 1996. 404-24. Political Science Quarterly 120 (2): 219-41. Krauthammer. American Economic Review 79 (5): Farrell. Quarterly Journal of Economics 119 (3): 861-98. Journal of Economic November 15. P. V. Gibbons. Econometrica 69 (5): 1193-1235. Cognition and behavior in normal-form games: an experimental study. C.net/English/archive/ archive?Archiveld=7403 Benabou. Colucci /Binary Choice Sender-Receiver Game 685 7. Cohen. American Economic Review 93 (1): 133-49. and D. Bush in the 2004 Presidential election. This seems indeed to be the case for various more recent video or audio messages attributed to bin Laden. Credulity. Arizona State University. Ho. Chen. ideology. A. Ottaviani. and Aznar's message right after theMadrid bombings seem to fit in this more general maintain the assumption of a binary message space because of the kind of application we have inmind. 2004. 2d version (Singapore Management paper series 05-2008).Greenberg. Sheldon.. Laroque. Analyses of Social Issues and Public Policy 5(1): Costa-Gomes. and T. 2004. and V. 11. The Time Magazine. Quarterly Journal of Economics Camerer. Groseclose.

http://www.html I.168. Kerry says bin Laden tape gave Bush a lift. Cambridge. players' models of other players: Theory Behavior 10(1): 218-54. 4 Dec 2012 10:57:59 AM All use subject to JSTOR Terms and Conditions . and P. play atWimbledon. 2003. 1991. On Economic and Organization 25 (3): 309-27. 2005. Review of Economic Studies 70 (2): 395-415. A theory of credibility. Economic Behavior 1995. 2005. Walker. Minimax and experimental American evidence. January 31. Sobel. Game theory: Analysis of Conflict. M. Review of Economic Studies 52 (4): 557-73. and J. Nagel. R. Journal of Stahl. Experimental evidence on players' models of other players. Journal of Theoretical Politics 17 (1): 107-36. Games and -. The New York Times. Economic Review 91 (5): This content downloaded by the authorized user from 192. 1994. R. in guessing games: An experimental study. Palacios-Huerta. D. 2001. MA: Harvard University Press. Wilson. Professionals play minimax. 1521-38. 1985.com/2005/01/31/politics/31kerry. 85(5): 1995. Wooders. J.. Informational party primaries and strategic ambiguity.nytimes.. Myerson.206 on Tue. A. Unravelling 1313-26. American Economic Review Nagourney. (accessed October 2006).82. A.686 Journal of Conflict Resolution Meirowitz.