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Costly Communication in Groups: Theory and an Experiment

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  • Alistair Wilson

Abstract

I develop a novel model of group-based deliberation in which communication is costly in two directions: agents must pay separate costs to send and to receive messages. Equilibrium strategies have an intuitive characterization - those with the best information send, those with the worst information receive. But free-riding leads to less information exchange than is optimal. Testing the model's predictions with an experiment I find that subjects overcommunicate when costs are high, but fail to benefit from this as much as they should. In welfare terms the experiment finds that listening costs are more harmful to welfare, in contrast with theory, which indicates sending costs. The experiment also suggests that the existence of costly communication channels can reduce total welfare.

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Bibliographic Info

Paper provided by University of Pittsburgh, Department of Economics in its series Working Papers with number 488.

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Date of creation: Feb 2011
Date of revision: Jul 2012
Handle: RePEc:pit:wpaper:488

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  1. Eliaz, Kfir & Ray, Debraj & Razin, Ronny, 2004. "Group Decision-Making in the Shadow of Disagreement," CEPR Discussion Papers 4480, C.E.P.R. Discussion Papers.
  2. Doraszelski Ulrich & Gerardi Dino & Squintani Francesco, 2003. "Communication and Voting with Double-Sided Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 3(1), pages 1-41, August.
  3. Olszewski, Wojciech, 2004. "Informal communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 180-200, August.
  4. Jordi Brandts & Gary Charness, 2000. "Hot vs. Cold: Sequential Responses and Preference Stability in Experimental Games," Experimental Economics, Springer, vol. 2(3), pages 227-238, March.
  5. Charness, Gary B & Brandts, Jordi, 1998. "Hot vs. Cold: Sequential Responses and Preference Stability in Experimental Games," University of California at Santa Barbara, Economics Working Paper Series qt4kx7d5pv, Department of Economics, UC Santa Barbara.
  6. Vincent P. Crawford & Miguel A. Costa-Gomes & Nagore Iriberri, 2010. "Strategic Thinking," Levine's Working Paper Archive 661465000000001148, David K. Levine.
  7. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  8. Abhijit Banerjee & Rohini Somanathan, 2001. "A Simple Model Of Voice," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 189-227, February.
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Cited by:
  1. Dietrichson, Jens & Jochem, Torsten, 2014. "Organizational coordination and costly communication with boundedly rational agents," Comparative Institutional Analysis Working Paper Series 2014:1, Comparative Institutional Analysis, Lund University School of Economics and Management.

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