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Non-binding signals: are they effective or ineffectual?

Author

Listed:
  • Amy Moore

    (Southern Utah University)

  • Michael Taylor

    (University of Notre Dame)

Abstract

Companies often send non-binding messages to their competitors, to consumers, to channel members and to various other recipients. When such messages are in the form of price signals, they tend to make antitrust authorities uneasy since it is widely believed that price signaling can and does serve as a collusion facilitating mechanism. We conducted experimental posted-offer markets with multiple competitive equilibria, and found that contrary to expectations, markets in which sellers could engage in cheap talk had lower contract prices than markets without cheap talk opportunities.

Suggested Citation

  • Amy Moore & Michael Taylor, 2008. "Non-binding signals: are they effective or ineffectual?," Economics Bulletin, AccessEcon, vol. 3(53), pages 1-11.
    • Handle: RePEc:ebl:ecbull:eb-08c90005
    as

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    References listed on IDEAS

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    1. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February.
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    Cited by:

    1. Chen, Gang & Rytter, Niels G.M. & Jiang, Liping & Nielsen, Peter & Jensen, Lars, 2017. "Pre-announcements of price increase intentions in liner shipping spot markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 95(C), pages 109-125.

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    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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