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Equilibrium refinement vs. level-k analysis: An experimental study of cheap-talk games with private information

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  • Kawagoe, Toshiji
  • Takizawa, Hirokazu
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    Abstract

    We present the experimental results of cheap-talk games with private information. We systematically compare various equilibrium refinement theories and bounded rationality models such as level-k analysis in explaining our experimental data. As in the previous literature, we find that when interests between sender and receiver are aligned, informative communication frequently arises. While babbling equilibrium play is observed more frequently in conflicting interest cases, a substantial number of players tend to choose truth-telling and credulous play. We also find that level-k analysis outperforms equilibrium refinement theories in explaining this phenomenon. Our results also confirm the existence of the "truth bias" and "truth-detection bias" reported in communication theory.

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    Bibliographic Info

    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 66 (2009)
    Issue (Month): 1 (May)
    Pages: 238-255

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    Handle: RePEc:eee:gamebe:v:66:y:2009:i:1:p:238-255

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    Web page: http://www.elsevier.com/locate/inca/622836

    Related research

    Keywords: Cheap talk Refinement Level-k analysis Truth-bias Experiment;

    References

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    Cited by:
    1. Hertel, Johanna & Smith, John, 2010. "Not so cheap talk: Costly and discrete communication," MPRA Paper 23560, University Library of Munich, Germany.
    2. Sean Duffy & Tyson Hartwig & John Smith, 2014. "Costly and discrete communication: an experimental investigation," Theory and Decision, Springer, vol. 76(3), pages 395-417, March.
    3. Kawagoe, Toshiji & Takizawa, Hirokazu, 2012. "Level-k analysis of experimental centipede games," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 548-566.
    4. Holm, Håkan J., 2010. "Truth and lie detection in bluffing," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 318-324, November.
    5. Kawagoe, Toshiji & Narita, Yusuke, 2014. "Guilt aversion revisited: An experimental test of a new model," Journal of Economic Behavior & Organization, Elsevier, vol. 102(C), pages 1-9.
    6. Holm, Håkan J. & Kawagoe, Toshiji, 2008. "Face-to-Face Lying – an experimental study in Sweden and Japan," Working Papers 2008:5, Lund University, Department of Economics.
    7. Mikhail Drugov & Roberto Hernán-González & Praveen Kujal & Marta Troya Martinez, 2013. "Cheap Talk with Two Audiences: An Experiment," Working Papers 13-32, Chapman University, Economic Science Institute.
    8. Lai, Ernest K. & Lim, Wooyoung, 2012. "Authority and communication in the laboratory," Games and Economic Behavior, Elsevier, vol. 74(2), pages 541-560.

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