CHEAP TALK AND REPUTATION IN REPEATED PRETRIAL NEGOTIATION

Infinitely repeated interaction between a defendant and a plaintiff ca n enhance the credibility of cheap talk and improve efficiency in outc omes that would be infeasible without cheap talk, The basic driving fo rce is reputation effect, If the players are concerned about their rep utation, cheap talk cannot be taken as meaningless even in a game wher e the interests of the players are sufficiently conflicting, because p ossible current gains from opportunistic behavior can be wiped out by future losses in payoff from damaged reputation.