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Pre-Play Communication with Forgone Costly Messages: Experimental Evidence on Forward Induction

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  • Andreas Blume
  • Peter H. Kriss
  • Roberto A. Weber

Abstract

We experimentally study optional costly communication in Stag-Hunt games. Prior research demonstrates that efficient coordination is difficult without a communication option but obtains regularly with mandatory costless pre-play messages. We find that even small communication costs dramatically reduce message use when communication is optional, but efficient coordination can occur with similar frequency as under costless communication. These findings can be accounted for by formalizations of forward induction that take Nash equilibrium as a reference point (such as Kohlberg and Mertens (1986) and Govindan and Wilson (2009)), while formalizations that only appeal to (higher-order) knowledge of rationality remain silent in this environment.

Suggested Citation

  • Andreas Blume & Peter H. Kriss & Roberto A. Weber, 2016. "Pre-Play Communication with Forgone Costly Messages: Experimental Evidence on Forward Induction," CESifo Working Paper Series 5958, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_5958
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    File URL: https://www.cesifo-group.de/DocDL/cesifo1_wp5958.pdf
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    References listed on IDEAS

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    Cited by:

    1. Fehr, Dietmar, 2017. "Costly communication and learning from failure in organizational coordination," European Economic Review, Elsevier, vol. 93(C), pages 106-122.
    2. Kriss, Peter H. & Blume, Andreas & Weber, Roberto A., 2016. "Coordination with decentralized costly communication," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 225-241.

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