Which of the following is an example of cheap talk?
A) Two firms sign a contract agreeing to mutually beneficial actions.
B) I sign a lease with my landlord agreeing to pay $\$ 500$ on the first of every month.
C) I verbally swear in court to tell the truth.
D) I promise my mom that I will not go to the party.

Question

Quizplus · Accepted Answer

Cheap talk refers to communication between parties that does not directly affect the payoffs of the interaction. It's often non-binding and costless to the speaker. Promising something without a formal or enforceable agreement, like promising a parent not to attend a party, is an example of cheap talk. The other options involve formal agreements or legal obligations, which carry consequences for non-compliance.

Which of the Following Is an Example of Cheap Talk $500\$ 500$500

Which of the Following Is an Example of Cheap Talk $\$ 500$