COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1542

Sequential Equilibria in Bayesian Games with Communication

Dino Gerardi
Department of Economics, Yale University
and
Roger B. Myerson
Department of Economics, University of Chicago

December 2005

We study the effects of communication in Bayesian games when the players are sequentially rational but some combinations of types have zero probability. Not all communication equilibria can be implemented as sequential equilibria. We define the set of strong sequential equilibria (SSCE) and characterize it. SSCE differs from the concept of sequential communication equilibrium (SCE) defined by Myerson (1986) in that SCE allows the possibility of trembles by the mediator. We show that these two concepts coincide when there are three or more players, but the set of SSCE may be strictly smaller than the set of SCE for two-player games.

Keywords: Bayesian games, Communication, Communication equilibrium, Sequential communication equilibrium

JEL Classification: C72, D82