Econometrica: Nov 1986, Volume 54, Issue 6

An Approach to Communication Equilibria<1375:AATCE>2.0.CO;2-Z
p. 1375-1385

Francoise Forges

The Nash equilibrium concept may be extended gradually when the rules of the game are interpreted in a wider and wider sense, so as to allow preplay or even intraplay communication. A well-known extension of the Nash equilibrium is Aumann's correlated equilibrium, which depends only on the normal form of the game. Two other solution concepts for multistage games are proposed here: the extensive form correlated equilibrium, where the players can observe private extraneous signals at every stage and the communication equilibrium where the players are furthermore allowed to transmit inputs to an appropriate device at every stage. We show that the set of payoffs associated with each solution concept has a canonical representation (in the spirit of the revelation principle) and is a convex polyhedron. We also provide for each concept a "super canonical" game such that the set of payoffs associated with the solution concept is precisely the set of Nash equilibrium payoffs of this game.

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