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Noisy commitments: The impact of information accuracy on efficiency

  • Eyal Ert

    ()

    (Max Wertheimer Minerva Center for Cognitive Research, Faculty of Industrial Engineering and Management, Israeli Institute of Technology, Haifa, Israel)

  • Andreas Nicklisch

    ()

    (Max Planck Institute for Research on Collective Goods, Bonn)

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    We report an experiment designed to test the influence of noisy commitments on efficiency in a simple bargaining game. We investigate two different levels of commitment reliability in a variant of the peasant-dictator game. Theoretical analysis suggests that the reliability of commitments in this game does not affect efficiency. We find that accurate commitments promote efficiency, as expected by game theory. However, noisy commitments are found to impair efficiency. We explain this effect by the differences between incentives off the equilibrium path under conditions of accurate commitments and noisy commitments. This difference changes the game structure and in the current game facilitates more random responses.

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    File URL: http://www.coll.mpg.de/pdf_dat/2006_04online.pdf
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    Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2006_4.

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    Length: 23 pages
    Date of creation: Feb 2006
    Date of revision:
    Handle: RePEc:mpg:wpaper:2006_04
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