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Authority and communication in the laboratory

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  • Lai, Ernest K.
  • Lim, Wooyoung

Abstract

We report findings from experiments on two delegation–communication games. An uninformed principal chooses whether to fully delegate her decision-making authority to an informed agent or to retain the authority and communicate with the agent via cheap talk to obtain decision-relevant information. In the game in which the delegation outcome is payoff-dominated by both the truthful and the babbling communication outcomes, we find that principal-subjects almost always retain their authority and agent-subjects communicate truthfully. Significantly more choices of delegation than of communication are observed in another game in which the delegation outcome payoff-dominates the unique babbling communication outcome; yet there is a non-negligible fraction of principal-subjects who holds on to their authority and agent-subjects who transmits some information. A level-k analysis of the game indicates that a principal-subject “under-delegates” due to the belief that her less-than-fully-strategic opponent will provide information; such belief is in turn consistent with the actual play.

Suggested Citation

  • Lai, Ernest K. & Lim, Wooyoung, 2012. "Authority and communication in the laboratory," Games and Economic Behavior, Elsevier, vol. 74(2), pages 541-560.
  • Handle: RePEc:eee:gamebe:v:74:y:2012:i:2:p:541-560
    DOI: 10.1016/j.geb.2011.08.006
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    1. Ezquerra, Lara & Kujal, Praveen, 2020. "Self-selecting into being a dictator: Distributional consequences," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
    2. Fehrler, Sebastian & Janas, Moritz, 2021. "Delegation to a Group," IZA Discussion Papers 14426, Institute of Labor Economics (IZA).
    3. Battaglini, Marco & Lai, Ernest K. & Lim, Wooyoung & Wang, Joseph Tao-Yi, 2019. "The Informational Theory of Legislative Committees: An Experimental Analysis," American Political Science Review, Cambridge University Press, vol. 113(1), pages 55-76, February.
    4. Silvia Dominguez Martinez & Randolph Sloof & Ferdinand von Siemens, 2010. "Monitoring your Friends, not your Foes: Strategic Ignorance and the Delegation of Real Authority," Tinbergen Institute Discussion Papers 10-101/1, Tinbergen Institute.
    5. Silvia Dominguez Martinez & Randolph Sloof, 2016. "Communication versus (Restricted) Delegation: An Experimental Comparison," Tinbergen Institute Discussion Papers 16-050/VII, Tinbergen Institute.
    6. Jiabin Wu, 2018. "Indirect higher order beliefs and cooperation," Experimental Economics, Springer;Economic Science Association, vol. 21(4), pages 858-876, December.
    7. Leonard Hoeft & Michael Kurschilgen & Wladislaw Mill & Simone Vannuccini, 2022. "Norms as Obligations," Munich Papers in Political Economy 22, Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich.
    8. Peter H. Kriss & Roberto Weber, 2013. "Organizational formation and change: lessons from economic laboratory experiments," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 14, Edward Elgar Publishing.
    9. Katharina Eckartz & Christiane Ehses-Friedrich, 2014. "Strategic Communication: An Experimental Investigation," Jena Economics Research Papers 2014-007, Friedrich-Schiller-University Jena.
    10. Dominguez-Martinez, Silvia & Sloof, Randolph & von Siemens, Ferdinand A., 2014. "Monitored by your friends, not your foes: Strategic ignorance and the delegation of real authority," Games and Economic Behavior, Elsevier, vol. 85(C), pages 289-305.
    11. 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.
    12. Sebastian Fehrler & Moritz Janas, 2021. "Delegation to a Group," Management Science, INFORMS, vol. 67(6), pages 3714-3743, June.

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    More about this item

    Keywords

    Cheap-talk communication; Decision-making authority; Delegation; Laboratory experiment; Level-k model;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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