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Noisy commitments: The impact of information accuracy on efficiency

Author

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  • 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)

Abstract

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.

Suggested Citation

  • Eyal Ert & Andreas Nicklisch, 2006. "Noisy commitments: The impact of information accuracy on efficiency," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2006_4, Max Planck Institute for Research on Collective Goods.
  • Handle: RePEc:mpg:wpaper:2006_04
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    References listed on IDEAS

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    Cited by:

    1. Hendrik Hakenes & Isabel Schnabel, 2006. "The Threat of Capital Drain: A Rationale for Public Banks?," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2006_11, Max Planck Institute for Research on Collective Goods.

    More about this item

    Keywords

    Commitments; efficiency; experimental economics; information; trust;

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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