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Gossip and the efficiency of interactions

Listed author(s):
  • Dietmar Fehr

    ()

  • Matthias Sutter

    ()

Human communication in organizations often involves a large amount of gossiping about others. Here we study in an experiment whether gossip affects the efficiency of human interactions. We let subjects play a trust game. Third parties observe a trustee's behavior and can gossip about it by sending a message to the trustor with whom the observed trustee will be paired (for the first time) in the next round. While messages are non-verifiable and sometimes also incorrect, the possibility of gossip is highly efficiency-increasing compared to a situation without any gossip. In two further control treatments, we show that the mere fact of being observed by third parties cannot explain the efficiency-increasing effect of gossip, and that noisy gossip (where information transmission from third parties to trustors can fail) still increases efficiency, but less so than if information transmission is undisturbed.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2016-03.

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Length: 40 pages
Date of creation: Feb 2016
Handle: RePEc:inn:wpaper:2016-03
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