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Can there be a market for cheap-talk information? An experimental investigation

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  • Cabrales, Antonio
  • Feri, Francesco
  • Gottardi, Piero
  • Meléndez-Jiménez, Miguel A.

Abstract

This paper reports on experiments testing the viability of markets for cheap-talk information. We find that the level of trade in these markets is very small and eventually vanishes. Sellers provide low-quality information even when doing so does not increase their monetary payoff. This contributes to the low demand in the market for information. Moreover, we observe the same very low level of activity in the market for information when sellers face no conflict of interest and the noise in the quality of the transmitted information is much lower. Hence, we argue that the collapse of the market for information is a demand phenomenon, and even small uncertainty over the quality of information seems to have a large impact.

Suggested Citation

  • Cabrales, Antonio & Feri, Francesco & Gottardi, Piero & Meléndez-Jiménez, Miguel A., 2020. "Can there be a market for cheap-talk information? An experimental investigation," Games and Economic Behavior, Elsevier, vol. 121(C), pages 368-381.
    • Handle: RePEc:eee:gamebe:v:121:y:2020:i:c:p:368-381
    DOI: 10.1016/j.geb.2020.03.002
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    2. Konstantinos Ioannidis, 2022. "Habitual Communication," Tinbergen Institute Discussion Papers 22-016/I, Tinbergen Institute.

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    More about this item

    Keywords

    Experiment; Cheap talk; Auction; Information acquisition; Information sale;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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