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Credible Communication and Cooperation: Experimental Evidence from Multi-stage Games

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  • Andersson, Ola

    ()
    (Research Institute of Industrial Economics (IFN))

  • Wengström, Erik

    ()
    (Lund University)

Abstract

It is well known that communication often serves as a facilitator for cooperation in static games. Yet, communication can serve entirely different purposes in dynamic settings as communication during the game may work as a means for renegotiation, potentially undermining the credibility of cooperative strategies. To explore this issue, this paper experimentally investigates cooperation and non-binding communication in a two-stage game. More specifically, two treatments are considered: one with only pre-play communication and one where subjects can also communicate intra-play between the stages of the game. The results highlight a nontrivial difference concerning the effects of pre-play communication between the two treatments. Pre-play communication only has a significant impact on cooperation when no intra-play communication is possible. The results suggest that the credibility of pre-play messages may depend crucially on future communication opportunities.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 883.

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Length: 45 pages
Date of creation: 19 Sep 2011
Date of revision:
Handle: RePEc:hhs:iuiwop:0883

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Keywords: Communication; Cooperation; Renegotiation; Experiments;

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Cited by:
  1. Embrey Matthew & Mengel Friederike & Peeters Ronald, 2012. "Strategic commitment and cooperation in experimental games of strategic complements and substitutes," Research Memorandum 052, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  2. Christer Andersson & Ola Andersson & Tommy Andersson, 2013. "Sealed bid auctions versus ascending bid auctions: an experimental study," Review of Economic Design, Springer, vol. 17(1), pages 1-16, March.

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