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Cheap Talk, Information, and Coordination -Experimental Evidence

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Author Info
Gary Charness (University of California, Santa Barbara)
Brit Grosskopf (Harvard Business School)

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Abstract

Costless and non-binding pre-play communication (cheap talk) has been found to often be effective in achieving efficient outcomes in experimental games. However, in previous two-player experimental games each player was informed about both his payoff and the action of the other player in the pair. In the field, people may engage in cheap talk and subsequently learn their payoffs, but frequently only learn their own payoffs and not the actions of other people. We model this uncertainty in the framework of a 2x2 coordination game, in which one choice leads to the same payoff regardless of the action of the other player. We vary whether messages about intended play are permitted, and whether participants are informed about the other person's play. Cheap talk is found to be effective, as there is much more coordination in both Signal treatments than in either of the No Signal treatments. We also find that information about the other person's play appears to increase coordination when messages are permitted. However, in the No Signal treatments, the round-to-round changes in choices induced by this additional information are unable to overcome the apparent pessimism about the feasibility of coordination without a signal.

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Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number 09-01.

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Date of creation: 27 Sep 2001
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Handle: RePEc:cdl:ucsbec:09-01

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Related research
Keywords: Cheap Talk; Coordination; Payoff Information; Risk Dominance;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Blume, Andreas & Ortmann, Andreas, 2007. "The effects of costless pre-play communication: Experimental evidence from games with Pareto-ranked equilibria," Journal of Economic Theory, Elsevier, vol. 132(1), pages 274-290, January. [Downloadable!] (restricted)
  2. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, January.
  3. Cooper, Russell, et al, 1992. "Communication in Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 739-71, May. [Downloadable!] (restricted)
  4. COOPER, R. & DEJONG, D.V. & FORSYTHE, R. & Tom Ross, 1989. "Communication In Coordination Games," Carleton Industrial Organization Research Unit (CIORU) 89-07, Carleton University, Department of Economics.
  5. Harsanyi John C., 1995. "A New Theory of Equilibrium Selection for Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 10(2), pages 318-332, August. [Downloadable!] (restricted)
  6. Farrell, Joseph & Rabin, Matthew, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-18, Summer. [Downloadable!] (restricted)
  7. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December. [Downloadable!] (restricted)
  8. Hurkens, Sjaak, 1996. "Multi-sided Pre-play Communication by Burning Money," Journal of Economic Theory, Elsevier, vol. 69(1), pages 186-197, April. [Downloadable!] (restricted)
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  9. Isaac, R Mark & Walker, James M, 1988. "Group Size Effects in Public Goods Provision: The Voluntary Contributions Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 179-99, February. [Downloadable!] (restricted)
  10. Blume, Andreas, 1998. "Communication, Risk, and Efficiency in Games," Games and Economic Behavior, Elsevier, vol. 22(2), pages 171-202, February. [Downloadable!] (restricted)
  11. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November. [Downloadable!] (restricted)
  12. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1990. "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure," American Economic Review, American Economic Association, vol. 80(1), pages 234-48, March. [Downloadable!] (restricted)
  13. Arvan, Lanny & Cabral, Luis & Santos, Vasco, 1999. "Meaningful cheap talk must improve equilibrium payoffs," Mathematical Social Sciences, Elsevier, vol. 37(1), pages 97-106, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stefan Kohler, 2005. "Fairness vs. Social Welfare in Experimental Decisions," Economics Working Papers ECO2005/11, European University Institute. [Downloadable!]
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