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The Impact of Cheap Talk on Supply Chain Performance in Case of Asymmetric Information: An Experimental Investigation


  • Karl Inderfurth

    () (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Abdolkarim Sadrieh

    () (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Guido Voigt

    () (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)


The use of screening contracts is a common approach to solve supply chain coordination problems under asymmetric information. One major assumption in this context is that subjects will rather use their private information strategically than to reveal them truthfully, if they do not get any incentives to do this. This harms supply chain performance. This paper investigates the influence of costless pre-game communication (i.e. communication without any direct incentives) between a supplier and a buyer in a lotsizing framework. A laboratory experiment was conducted to test, whether this costless pre-game communication has (in contradiction to standard game-theory) an influence on supply chain coordination.

Suggested Citation

  • Karl Inderfurth & Abdolkarim Sadrieh & Guido Voigt, 2008. "The Impact of Cheap Talk on Supply Chain Performance in Case of Asymmetric Information: An Experimental Investigation," FEMM Working Papers 08001, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  • Handle: RePEc:mag:wpaper:08001

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    References listed on IDEAS

    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    2. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    3. Wulf Albers & Robin Pope & Reinhard Selten & Bodo Vogt, 2000. "Experimental Evidence for Attractions to Chance," German Economic Review, Verein für Socialpolitik, vol. 1(2), pages 113-130, May.
    4. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
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    Cited by:

    1. Pezeshki, Yahya & Baboli, Armand & Cheikhrouhou, Naoufel & Modarres, Mohammad & Akbari Jokar, Mohammad R., 2013. "A rewarding-punishing coordination mechanism based on Trust in a divergent supply chain," European Journal of Operational Research, Elsevier, vol. 230(3), pages 527-538.

    More about this item


    experimental economics; screening contracts; supply chain coordination;

    JEL classification:

    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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