The Power of Words: Why Communication fosters Cooperation and Efficiency

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The Power of Words: Why Communication fosters Cooperation and Efficiency

Author Info

López-Pérez, Raúl () (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

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Raúl López-Pérez

Abstract

We present a game-theoretical model that accounts for abundant experimental evidence from games with non-binding communication (‘cheap talk’). It is based on two key ideas: People are conditionally averse to break norms of honesty and fairness (i.e., the emotional cost of breaking a norm is low if few people comply), and heterogeneous with regard to their concern for norms. The model explains (a) why cooperation in social dilemmas rises if players can previously announce their intended play, (b) why details of the communication protocol like the number of message senders and the order in which players communicate affect cooperation, (c) why players in sender-receiver games tend to transmit more information than a standard analysis would predict, and (d) why senders of false messages are often sanctioned if punishment is available.

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Paper provided by Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History) in its series Working Papers in Economic Theory with number 2009/01.

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Length: 35 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:uam:wpaper:200901

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Web page: http://www.uam.es/departamentos/economicas/analecon/default.html
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For technical questions regarding this item, or to correct its listing, contact: (Raúl López-Pérez).

Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
D62 - Microeconomics - - Welfare Economics - - - Externalities
D64 - Microeconomics - - Welfare Economics - - - Altruism
Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-02-14 (All new papers)
NEP-CBE-2009-02-14 (Cognitive & Behavioural Economics)
NEP-EVO-2009-02-14 (Evolutionary Economics)
NEP-GTH-2009-02-14 (Game Theory)
NEP-SOC-2009-02-14 (Social Norms & Social Capital)

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