Sjaak Hurkens
Abstract: We investigate the consequences of allowing some players to send a costly message before a game is played. Since messages have no literal meaning sending costly messages is also called `burning money'. We consider a setting with n players among which k have the possibility to burn money. We show that strategy profiles in sets that are closed under rational behavior, yield all players that have the possibility to burn, their preferred outcome. Moreover, in such equilibria no money is actually burnt, the possibility alone suffices. For the special case with two players all results go through for persistent retracts as well.
Keywords: Burning money, curb sets.
Classification Number: C72.
Journal of Economic Theory 69:186-197 (1996)