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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, Tilburg Law and Economics Center)

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 deciding whether or not to contribute. Without communication, the unique equilibrium is fully efficient. We study whether the introduction of communication about returns can destroy efficiency. Communication can be precise (about the exact return), 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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Bibliographic Info

Paper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2008-047.

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Date of creation: 2008
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Handle: RePEc:dgr:kubtil:2008047

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Web page: http://www.tilburguniversity.nl/tilec/

Related research

Keywords: Communication; Efficiency; Lying; Public Goods;

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Cited by:
  1. Oliver Board & Andreas Blume, 2008. "Intentional Vagueness," Working Papers 365, University of Pittsburgh, Department of Economics, revised Aug 2008.
  2. Serra Garcia, M. & Damme, E.E.C. van & Potters, J.J.M., 2010. "Which Words Bond? An Experiment on Signaling in a Public Good Game (replaced by CentER DP 2011-139)," Discussion Paper 2010-33, Tilburg University, Center for Economic Research.

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