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An Experimental Study of Credible Deviations and ACDC

Author

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  • Adrian de Groot Ruiz

    (Radboud University Nijmegen)

  • Theo Offerman

    (University of Amsterdam)

  • Sander Onderstal

    (University of Amsterdam)

Abstract

We test the Average Credible Deviation Criterion (ACDC), a stability measure and refinement for cheap talk equilibria introduced in De Groot Ruiz, Offerman & Onderstal (2011b). ACDC has been shown to be predictive under general conditions and to organize data well in previous experiments meant to test other concepts. This experiment provides the first systematic test of whether and to which degree credible deviations matter for the stability of cheap talk equilibria. Furthermore, it tests ACDC in a new setting. We also introduce a neologism dynamic to explain the main dynamic characteristics of our data. Our main result is that credible deviations matter and matter gradually, as predicted by ACDC. In addition, our data support the predictions of ACDC in settings where existing concepts are silent. Finally, we test the prediction derived in De Groot Ruiz, Offerman & Onderstal (2011a) about bargaining power and information transmission. We find that, as predicted, less information is transmitted as the Sender's relative power decreases.

Suggested Citation

  • Adrian de Groot Ruiz & Theo Offerman & Sander Onderstal, 2011. "An Experimental Study of Credible Deviations and ACDC," Tinbergen Institute Discussion Papers 11-153/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20110153
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    More about this item

    Keywords

    Cheap Talk; Refinement; Selection; Experiment; Neologism Proofness; Announcement Proofness; ACDC;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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