IDEAS home Printed from https://ideas.repec.org/a/eee/gamebe/v121y2020icp368-381.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0899825620300361
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.geb.2020.03.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
    2. Costa-Gomes, Miguel & Crawford, Vincent P & Broseta, Bruno, 2001. "Cognition and Behavior in Normal-Form Games: An Experimental Study," Econometrica, Econometric Society, vol. 69(5), pages 1193-1235, September.
    3. Cabrales, Antonio & Gottardi, Piero, 2014. "Markets for information: Of inefficient firewalls and efficient monopolies," Games and Economic Behavior, Elsevier, vol. 83(C), pages 24-44.
    4. Toshiji Kawagoe & Hirokazu Takizawa, 2005. "Why Lying Pays: Truth Bias in the Communication with Conflicting Interests," Experimental 0503005, University Library of Munich, Germany.
    5. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107016064, October.
    6. Sanchez-Pages, Santiago & Vorsatz, Marc, 2007. "An experimental study of truth-telling in a sender-receiver game," Games and Economic Behavior, Elsevier, vol. 61(1), pages 86-112, October.
    7. Cai, Hongbin & Wang, Joseph Tao-Yi, 2006. "Overcommunication in strategic information transmission games," Games and Economic Behavior, Elsevier, vol. 56(1), pages 7-36, July.
    8. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
    9. Erev, Ido & Rapoport, Amnon, 1998. "Coordination, "Magic," and Reinforcement Learning in a Market Entry Game," Games and Economic Behavior, Elsevier, vol. 23(2), pages 146-175, May.
    10. Blume, Andreas, et al, 1998. "Experimental Evidence on the Evolution of Meaning of Messages in Sender-Receiver Games," American Economic Review, American Economic Association, vol. 88(5), pages 1323-1340, December.
    11. Blume, Andreas & DeJong, Douglas V. & Kim, Yong-Gwan & Sprinkle, Geoffrey B., 2001. "Evolution of Communication with Partial Common Interest," Games and Economic Behavior, Elsevier, vol. 37(1), pages 79-120, October.
    12. Gary Charness & Francesco Feri & Miguel A. Meléndez‐Jiménez & Matthias Sutter, 2014. "Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection," Econometrica, Econometric Society, vol. 82(5), pages 1615-1670, September.
    13. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107627314, October.
    14. Morgan John & Steiglitz Ken & Reis George, 2003. "The Spite Motive and Equilibrium Behavior in Auctions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-25, April.
    15. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization?," American Economic Review, American Economic Association, vol. 98(1), pages 145-179, March.
    16. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107016040, October.
    17. Navin Kartik, 2009. "Strategic Communication with Lying Costs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(4), pages 1359-1395.
    18. Bolton, Patrick & Freixas, Xavier & Shapiro, Joel, 2007. "Conflicts of interest, information provision, and competition in the financial services industry," Journal of Financial Economics, Elsevier, vol. 85(2), pages 297-330, August.
    19. Gottardi, Piero & Meléndez-Jiménez, Miguel A. & Feri, Francesco, 2016. "Can there be a market for cheap-talk information? Some experimental evidence," CEPR Discussion Papers 11206, C.E.P.R. Discussion Papers.
    20. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107638105, October.
    21. Jordi Brandts & Gary Charness, 2003. "Truth or Consequences: An Experiment," Management Science, INFORMS, vol. 49(1), pages 116-130, January.
    22. Fehr, Ernst & Glätzle-Rützler, Daniela & Sutter, Matthias, 2013. "The development of egalitarianism, altruism, spite and parochialism in childhood and adolescence," European Economic Review, Elsevier, vol. 64(C), pages 369-383.
    23. Bjorn Bartling & Ernst Fehr & Michel Andre Marechal & Daniel Schunk, 2009. "Egalitarianism and Competitiveness," American Economic Review, American Economic Association, vol. 99(2), pages 93-98, May.
    24. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
    25. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 53-82.
    26. Gary Charness & Uri Gneezy, 2010. "Portfolio Choice And Risk Attitudes: An Experiment," Economic Inquiry, Western Economic Association International, vol. 48(1), pages 133-146, January.
    27. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107016057, October.
    28. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization? Corrigendum," American Economic Review, American Economic Association, vol. 98(3), pages 1195-1196, June.
    29. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    30. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107674165, October.
    31. Toshiji Kawagoe & Hirokazu Takizawa, 2005. "Why Lying Pays: Truth Bias in the Communication with Conflicting Interests," Discussion papers 05018, Research Institute of Economy, Trade and Industry (RIETI).
    32. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
    33. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    34. Raúl López-Pérez & Eli Spiegelman, 2013. "Why do people tell the truth? Experimental evidence for pure lie aversion," Experimental Economics, Springer;Economic Science Association, vol. 16(3), pages 233-247, September.
    35. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
    36. Kartik, Navin & Ottaviani, Marco & Squintani, Francesco, 2007. "Credulity, lies, and costly talk," Journal of Economic Theory, Elsevier, vol. 134(1), pages 93-116, May.
    37. Joseph Tao-yi Wang & Michael Spezio & Colin F. Camerer, 2010. "Pinocchio's Pupil: Using Eyetracking and Pupil Dilation to Understand Truth Telling and Deception in Sender-Receiver Games," American Economic Review, American Economic Association, vol. 100(3), pages 984-1007, June.
    38. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Burdea, Valeria & Montero, Maria & Sefton, Martin, 2023. "Communication with partially verifiable information: An experiment," Games and Economic Behavior, Elsevier, vol. 142(C), pages 113-149.
    2. Konstantinos Ioannidis, 2022. "Habitual Communication," Tinbergen Institute Discussion Papers 22-016/I, Tinbergen Institute.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cabrales, Antonio & Feri, Francesco & Gottardi, Piero & Meléndez-Jiménez, Miguel A., 2021. "Communication and social preferences: an experimental analysis," CEPR Discussion Papers 15711, C.E.P.R. Discussion Papers.
    2. Gottardi, Piero & Meléndez-Jiménez, Miguel A. & Feri, Francesco, 2016. "Can there be a market for cheap-talk information? Some experimental evidence," CEPR Discussion Papers 11206, C.E.P.R. Discussion Papers.
    3. Ertac, Seda & Koçkesen, Levent & Ozdemir, Duygu, 2016. "The role of verifiability and privacy in the strategic provision of performance feedback: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 100(C), pages 24-45.
    4. de Groot Ruiz, Adrian & Offerman, Theo & Onderstal, Sander, 2015. "Equilibrium selection in experimental cheap talk games," Games and Economic Behavior, Elsevier, vol. 91(C), pages 14-25.
    5. Behnk, Sascha & Barreda-Tarrazona, Iván & García-Gallego, Aurora, 2014. "The role of ex post transparency in information transmission—An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 45-64.
    6. Özalp Özer & Upender Subramanian & Yu Wang, 2018. "Information Sharing, Advice Provision, or Delegation: What Leads to Higher Trust and Trustworthiness?," Management Science, INFORMS, vol. 64(1), pages 474-493, January.
    7. Nicolas Jacquemet & Stéphane Luchini & Jason F. Shogren & Adam Zylbersztejn, 2018. "Coordination with communication under oath," Experimental Economics, Springer;Economic Science Association, vol. 21(3), pages 627-649, September.
    8. Silvia Dominguez Martinez & Randolph Sloof, 2016. "Communication versus (Restricted) Delegation: An Experimental Comparison," Tinbergen Institute Discussion Papers 16-050/VII, Tinbergen Institute.
    9. Adrian Groot Ruiz & Theo Offerman & Sander Onderstal, 2014. "For those about to talk we salute you: an experimental study of credible deviations and ACDC," Experimental Economics, Springer;Economic Science Association, vol. 17(2), pages 173-199, June.
    10. Dufwenberg, Martin & Servátka, Maroš & Vadovič, Radovan, 2017. "Honesty and informal agreements," Games and Economic Behavior, Elsevier, vol. 102(C), pages 269-285.
    11. Peeters, Ronald & Vorsatz, Marc & Walzl, Markus, 2015. "Beliefs and truth-telling: A laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 113(C), pages 1-12.
    12. Lafky, Jonathan & Lai, Ernest K. & Lim, Wooyoung, 2022. "Preferences vs. strategic thinking: An investigation of the causes of overcommunication," Games and Economic Behavior, Elsevier, vol. 136(C), pages 92-116.
    13. Ivan Balbuzanov, 2019. "Lies and consequences," International Journal of Game Theory, Springer;Game Theory Society, vol. 48(4), pages 1203-1240, December.
    14. Antonio Cabrales & Michalis Drouvelis & Zeynep Gurguy & Indrajit Ray, 2017. "Transparency is Overrated: Communicating in a Coordination Game with Private Information," CESifo Working Paper Series 6781, CESifo.
    15. Serra Garcia, M. & van Damme, E.E.C. & Potters, J.J.M., 2010. "Which Words Bond? An Experiment on Signaling in a Public Good Game (replaced by CentER DP 2011-139)," Discussion Paper 2010-33, Tilburg University, Center for Economic Research.
    16. Sheremeta, Roman M. & Shields, Timothy W., 2013. "Do liars believe? Beliefs and other-regarding preferences in sender–receiver games," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 268-277.
    17. Lightle, John P., 2013. "Harmful lie aversion and lie discovery in noisy expert advice games," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 347-362.
    18. Tobias Gesche, 2016. "De-biasing strategic communication," ECON - Working Papers 216, Department of Economics - University of Zurich, revised Sep 2021.
    19. Cabrales, Antonio & Drouvelis, Michalis & Gurguc, Zeynep & Ray, Indrajit, 2018. "Do we need to listen to all stakeholders?: communicating in a coordination game with private information," Cardiff Economics Working Papers E2018/23, Cardiff University, Cardiff Business School, Economics Section.
    20. Serra Garcia, M. & van Damme, E.E.C. & Potters, J.J.M., 2010. "Which Words Bond? An Experiment on Signaling in a Public Good Game (replaced by TILEC DP 2011-055)," Other publications TiSEM 5ed24dc3-e6cf-4fa4-bace-2, Tilburg University, School of Economics and Management.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:121:y:2020:i:c:p:368-381. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.