# Economics Dictionary of Arguments

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Kranton I 433
Communication Activity/Maximal Communication Equilibrium/MCE/Bloch/Demange/Kranton: We show that the MCE is Pareto-optimal for the unbiased agents and provides a refinement criterion, referred to as “activity” that distinguishes among equilibria.
1. (…) as in cheap talk games, there are babbling equilibria in which no valuable information is created. Suppose each unbiased agent who has not received the signal takes the same action independent of any message received and votes for 0 according to his prior. In this case, all unbiased agents are indifferent between all actions: creating, or not, true or false messages and transmitting, or not, messages. A simple equilibrium then consists of the following strategies: Unbiased agents never create or transmit any messages, and biased agents always create m = 1 upon receipt of the signal and transmit any m = 1 but no other message. The only messages that are generated are those from the biased agents, and hence they are not informative. These strategies form an equilibrium supported by (consistent) posterior beliefs equal to the prior, except for the agent who has received the signal.
2. Second, there are equilibria where unbiased agents create truthful messages but do not transmit credible messages. These equilibria involve a coordination failure and cannot easily be eliminated using standard selection arguments. The standard perfection argument that generates transmission in a persuasion game does not hold in our model. Because of the presence of biased agents, messages are not perfectly informative, and it may be rational not to transmit message 1.
Kranton I 434
To refine the equilibrium set, consider restricting attention to the following simple strategies: A biased agent is active if and only if she creates message M(s) = 1 and only transmits message 1. An unbiased agent is active if and only if she creates a message that matches the signal and transmits message m if she thinks the probability that the true state is m is higher than 1/2. This refinement allows us to single out the MCE.
Conclusion: The MCE is the only equilibrium where all agents are active. In an equilibrium where all agents are active, coordination failures are ruled out at both the message creation and transmission stages. This results in the highest expected payoff for the unbiased agents. >Network Models/Kranton, >Communication Models/Kranton, >Communication Filters/Kranton, >Misinformation/Economic Theories, >Communication Equilibria/Bayesianism.

Francis Bloch, Gabrielle Demange & Rachel Kranton, 2018. "Rumors And Social Networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(2), pages 421-448.

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Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution.
The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.

Kranton I
Rachel E. Kranton
Francis Bloch
Gabrielle Demange,
Rumors And Social Networks 2018

Kranton II
Rachel E. Kranton
George A. Akerlof
Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being Princeton 2011