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Truth or Efficiency? Communication in a Sequential Public Good Game

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Author Info
Serra Garcia, M.
Damme, E.E.C. van
Potters, J.J.M. (Tilburg University, Center for Economic Research)

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Abstract

We examine communication in a 2-player sequential public good game in which the leader has private information about the return from contributing to it. The leader decides first and the follower observes the leader's contribution, before de- ciding whether or not to contribute. Without communication, the unique equilib- rium is fully efficient. We study whether the introduction of communication about returns can destroy efficiency. Communication can be precise (about the exact re- turn), or vague. If leaders would communicate precisely and truthfully, they would reveal that followers would do best to free ride, thereby distorting both players' incentives to invest and destroying efficiency. We show that leaders lie in order to avoid these negative consequences. If vague messages are allowed, the extent of lying drops and vague messages are used instead. Overall, followers contribute when the leader does, and the introduction of communication neither increases nor decreases contributions to the public good.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2008-107.

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Date of creation: 2008
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Handle: RePEc:dgr:kubcen:2008107

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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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. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March. [Downloadable!]
  2. Jan Potters & Martin Sefton & Lise Vesterlund, 2007. "Leading-by-example and signaling in voluntary contribution games: an experimental study," Economic Theory, Springer, vol. 33(1), pages 169-182, October. [Downloadable!] (restricted)
  3. Potters, J.J.M. & Sefton, M. & Vesterlund, L., 2007. "Leading-by-example and signaling in voluntary contribution games: An experimental study," Open Access publications from Tilburg University urn:nbn:nl:ui:12-302954, Tilburg University. [Downloadable!]
  4. Moxnes, E. & Heijden, E. van der, 2000. "The effect of leadership in a public bad experiment," Discussion Paper 102, Tilburg University, Center for Economic Research. [Downloadable!]
  5. Myerson, Roger B., 1994. "Communication, correlated equilibria and incentive compatibility," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 24, pages 827-847 Elsevier. [Downloadable!] (restricted)
  6. Vesterlund, Lise, 2003. "The informational value of sequential fundraising," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 627-657, March. [Downloadable!] (restricted)
  7. Werner Güth & M. Vittoria Levati & Matthias Sutter & Eline van der Heijden, 2006. "Leading by example with and without exclusion power in voluntary contribution experiments," Papers on Strategic Interaction 2006-35, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
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  8. Hermalin, Benjamin E, 1998. "Toward an Economic Theory of Leadership: Leading by Example," American Economic Review, American Economic Association, vol. 88(5), pages 1188-1206, December. [Downloadable!] (restricted)
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  9. Kohlberg, Elon & Mertens, Jean-Francois, 1986. "On the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 54(5), pages 1003-37, September. [Downloadable!] (restricted)
  10. Sjaak Hurkens & Navin Kartik, 2006. "(When) Would I Lie To You? Comment on ?Deception: The Role of Consequences?," UFAE and IAE Working Papers 664.06, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
  11. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October. [Downloadable!] (restricted)
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  12. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February. [Downloadable!] (restricted)
  13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June. [Downloadable!] (restricted)
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  1. Andreas Blume & Oliver Board, 2009. "Intentional Vagueness," Working Papers 381, University of Pittsburgh, Department of Economics, revised May 2009. [Downloadable!]
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