IDEAS home Printed from https://ideas.repec.org/p/ver/wpaper/18-2017.html
   My bibliography  Save this paper

Watch your Words: an Experimental Study on Communication and the Opportunity Cost of Delegation

Author

Listed:
  • Armenak Antinyan

    (International Academy of Business and Economics, Tianjin University of Finance and Economics)

  • Luca Corazzini

    (Department of Economics, University of Venice \"Ca’ Foscari\")

  • Elena D'Agostino

    (Department of Economics (SEAM), University of Messina.)

  • Filippo Pavesi

    (Department of Economics (University of Verona))

Abstract

Communication has been shown to play a positive role in promoting trust, yet there is no evidence on how sensitive this result is to the size of the gains from cooperation. To investigate this issue, we adopt an experimental design in which a trustee can send a free form message to a trustor, before the latter makes a delegation choice, by selecting whether or not to allow the trustee to decide how to share a given sum between the two of them. We allow the opportunity cost of delegation to vary and find that the trustee makes use of non-precise promises prevalently when the opportunity cost of delegation is low. Moreover, communication increases the trustor’s beliefs on the amount that the trustee will choose to transfer, only when this cost is high to start with. This attenuates the effect of the size of the opportunity cost of delegation on the trustor’s choice. We also find evidence of deception, but in some circumstances the trustee is overoptimistic about her ability to deceive. Indeed, in the presence of lower opportunity costs of delegation, we document an illusion effect: a trustee using non-precise promises incorrectly expects these to exert a positive effect on the trustor’s beliefs and propensity to delegate.

Suggested Citation

  • Armenak Antinyan & Luca Corazzini & Elena D'Agostino & Filippo Pavesi, 2017. "Watch your Words: an Experimental Study on Communication and the Opportunity Cost of Delegation," Working Papers 18/2017, University of Verona, Department of Economics.
  • Handle: RePEc:ver:wpaper:18/2017
    as

    Download full text from publisher

    File URL: http://dse.univr.it/home/workingpapers/wp2017n18.pdf
    File Function: First version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    2. Rabin, Matthew, 1990. "Communication between rational agents," Journal of Economic Theory, Elsevier, vol. 51(1), pages 144-170, June.
    3. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
    4. Mariana Blanco & Dirk Engelmann & Alexander Koch & Hans-Theo Normann, 2010. "Belief elicitation in experiments: is there a hedging problem?," Experimental Economics, Springer;Economic Science Association, vol. 13(4), pages 412-438, December.
    5. Ederer, Florian & Stremitzer, Alexander, 2017. "Promises and expectations," Games and Economic Behavior, Elsevier, vol. 106(C), pages 161-178.
    6. Ellingsen, Tore & Johannesson, Magnus & Tjøtta, Sigve & Torsvik, Gaute, 2010. "Testing guilt aversion," Games and Economic Behavior, Elsevier, vol. 68(1), pages 95-107, January.
    7. Tore Ellingsen & Magnus Johannesson, 2004. "Promises, Threats and Fairness," Economic Journal, Royal Economic Society, vol. 114(495), pages 397-420, April.
    8. Luca Corazzini & Sebastian Kube & Michel André Maréchal & Antonio Nicolò, 2014. "Elections and Deceptions: An Experimental Study on the Behavioral Effects of Democracy," American Journal of Political Science, John Wiley & Sons, vol. 58(3), pages 579-592, July.
    9. Servátka, Maroš & Tucker, Steven & Vadovič, Radovan, 2011. "Words speak louder than money," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 700-709.
    10. Harrison, Glenn W. & Martínez-Correa, Jimmy & Swarthout, J. Todd, 2014. "Eliciting subjective probabilities with binary lotteries," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 128-140.
    11. Marta Serra-Garcia & Eric van Damme & Jan Potters, 2013. "Lying About What You Know Or About What You Do?," Journal of the European Economic Association, European Economic Association, vol. 11(5), pages 1204-1229, October.
    12. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
    13. Dufwenberg, Martin & Servátka, Maroš & Vadovič, Radovan, 2017. "Honesty and informal agreements," Games and Economic Behavior, Elsevier, vol. 102(C), pages 269-285.
    14. Giuseppe Attanasi & Pierpaolo Battigalli & Elena Manzoni, 2016. "Incomplete-Information Models of Guilt Aversion in the Trust Game," Management Science, INFORMS, vol. 62(3), pages 648-667, March.
    15. Marina Agranov & Andrew Schotter, 2012. "Ignorance Is Bliss: An Experimental Study of the Use of Ambiguity and Vagueness in the Coordination Games with Asymmetric Payoffs," American Economic Journal: Microeconomics, American Economic Association, vol. 4(2), pages 77-103, May.
    16. Battigalli, Pierpaolo & Charness, Gary & Dufwenberg, Martin, 2013. "Deception: The role of guilt," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 227-232.
    17. Seidmann, Daniel J., 1990. "Effective cheap talk with conflicting interests," Journal of Economic Theory, Elsevier, vol. 50(2), pages 445-458, April.
    18. Stefano Demichelis & Jorgen W. Weibull, 2008. "Language, Meaning, and Games: A Model of Communication, Coordination, and Evolution," American Economic Review, American Economic Association, vol. 98(4), pages 1292-1311, September.
    19. Tanjim Hossain & Ryo Okui, 2013. "The Binarized Scoring Rule," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(3), pages 984-1001.
    20. Maroš Servátka & Radovan Vadovič, 2009. "Unequal outside options in the lost wallet game," Economics Bulletin, AccessEcon, vol. 29(4), pages 2870-2883.
    21. John, Leslie K. & Loewenstein, George & Rick, Scott I., 2014. "Cheating more for less: Upward social comparisons motivate the poorly compensated to cheat," Organizational Behavior and Human Decision Processes, Elsevier, vol. 123(2), pages 101-109.
    22. Benabou, Roland & Falk, Armin & Tirole, Jean, 2018. "Narratives, Imperatives, and Moral Reasoning," IZA Discussion Papers 11665, Institute of Labor Economics (IZA).
    23. Tomz, Michael & Van Houweling, Robert P., 2009. "The Electoral Implications of Candidate Ambiguity," American Political Science Review, Cambridge University Press, vol. 103(1), pages 83-98, February.
    24. Battigalli, Pierpaolo & Dufwenberg, Martin, 2009. "Dynamic psychological games," Journal of Economic Theory, Elsevier, vol. 144(1), pages 1-35, January.
    25. Ostrom, Elinor & Walker, James & Gardner, Roy, 1992. "Covenants with and without a Sword: Self-Governance Is Possible," American Political Science Review, Cambridge University Press, vol. 86(2), pages 404-417, June.
    26. Cadsby, C. Bram & Du, Ninghua & Song, Fei & Yao, Lan, 2015. "Promise keeping, relational closeness, and identifiability: An experimental investigation in China," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 57(C), pages 120-133.
    27. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    28. Robert J. Shiller, 2017. "Narrative Economics," American Economic Review, American Economic Association, vol. 107(4), pages 967-1004, April.
    29. Lerner, Josh & Malmendier, Ulrike, 2008. "Contractibility and the Design of Research Agreements," Department of Economics, Working Paper Series qt2gg4h8z0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    30. James Cox & Maroš Servátka & Radovan Vadovič, 2010. "Saliency of outside options in the lost wallet game," Experimental Economics, Springer;Economic Science Association, vol. 13(1), pages 66-74, March.
    31. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October.
    32. Serra-Garcia, Marta & van Damme, Eric & Potters, Jan, 2011. "Hiding an inconvenient truth: Lies and vagueness," Games and Economic Behavior, Elsevier, vol. 73(1), pages 244-261, September.
    33. Fehr, Ernst & Schmidt, Klaus M., 2006. "The Economics of Fairness, Reciprocity and Altruism - Experimental Evidence and New Theories," Handbook on the Economics of Giving, Reciprocity and Altruism, in: S. Kolm & Jean Mercier Ythier (ed.), Handbook of the Economics of Giving, Altruism and Reciprocity, edition 1, volume 1, chapter 8, pages 615-691, Elsevier.
    34. Houser, Daniel & Vetter, Stefan & Winter, Joachim, 2012. "Fairness and cheating," European Economic Review, Elsevier, vol. 56(8), pages 1645-1655.
    35. Ying Chen & Navin Kartik & Joel Sobel, 2008. "Selecting Cheap-Talk Equilibria," Econometrica, Econometric Society, vol. 76(1), pages 117-136, January.
    36. Marco Ottaviani & Francesco Squintani, 2006. "Naive audience and communication bias," International Journal of Game Theory, Springer;Game Theory Society, vol. 35(1), pages 129-150, December.
    37. Nahum D. Melumad & Toshiyuki Shibano, 1991. "Communication in Settings with No. Transfers," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 173-198, Summer.
    38. Christoph Vanberg, 2008. "Why Do People Keep Their Promises? An Experimental Test of Two Explanations -super-1," Econometrica, Econometric Society, vol. 76(6), pages 1467-1480, November.
    39. Josh Lerner & Ulrike Malmendier, 2010. "Contractibility and the Design of Research Agreements," American Economic Review, American Economic Association, vol. 100(1), pages 214-246, March.
    40. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    41. Inga Deimen & Dezső Szalay, 2019. "Delegated Expertise, Authority, and Communication," American Economic Review, American Economic Association, vol. 109(4), pages 1349-1374, April.
    42. Dufwenberg, Martin & Gneezy, Uri, 2000. "Measuring Beliefs in an Experimental Lost Wallet Game," Games and Economic Behavior, Elsevier, vol. 30(2), pages 163-182, February.
    43. Ben-Ner, Avner & Putterman, Louis, 2009. "Trust, communication and contracts: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 106-121, May.
    44. Johannes Abeler & Daniele Nosenzo & Collin Raymond, 2019. "Preferences for Truth‐Telling," Econometrica, Econometric Society, vol. 87(4), pages 1115-1153, July.
    45. Donald L. Ferrin & Kurt T. Dirks, 2003. "The Use of Rewards to Increase and Decrease Trust: Mediating Processes and Differential Effects," Organization Science, INFORMS, vol. 14(1), pages 18-31, February.
    46. Chen, Ying, 2011. "Perturbed communication games with honest senders and naive receivers," Journal of Economic Theory, Elsevier, vol. 146(2), pages 401-424, March.
    47. Alessandra Casella & Navin Kartik & Luis Sanchez & Sébastien Turban, 2018. "Communication in context: Interpreting promises in an experiment on competition and trust," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 115(5), pages 933-938, January.
    48. George A. Akerlof & Robert J. Shiller, 2015. "Phishing for Phools: The Economics of Manipulation and Deception," Economics Books, Princeton University Press, edition 1, number 10534.
    49. Wouter Dessein, 2002. "Authority and Communication in Organizations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 811-838.
    50. Agranov, Marina & Schotter, Andrew, 2013. "Language and government coordination: An experimental study of communication in the announcement game," Journal of Public Economics, Elsevier, vol. 104(C), pages 26-39.
    51. Charness, Gary & Dufwenberg, Martin, 2010. "Bare promises: An experiment," Economics Letters, Elsevier, vol. 107(2), pages 281-283, May.
    52. Khalmetski, Kiryl, 2016. "Testing guilt aversion with an exogenous shift in beliefs," Games and Economic Behavior, Elsevier, vol. 97(C), pages 110-119.
    53. Wang, Siyu & Houser, Daniel, 2019. "Demanding or deferring? An experimental analysis of the economic value of communication with attitude," Games and Economic Behavior, Elsevier, vol. 115(C), pages 381-395.
    54. Sivan Frenkel, 2014. "Competence and ambiguity in electoral competition," Public Choice, Springer, vol. 159(1), pages 219-234, April.
    55. Martimort, David & Semenov, Aggey, 2006. "Continuity in mechanism design without transfers," Economics Letters, Elsevier, vol. 93(2), pages 182-189, November.
    56. McKelvey, Richard D & Page, Talbot, 1990. "Public and Private Information: An Experimental Study of Information Pooling," Econometrica, Econometric Society, vol. 58(6), pages 1321-1339, November.
    57. Armenak Antinyan & Thomas Bassetti & Luca Corazzini & Filippo Pavesi, 2021. "Narratives on COVID-19 and Policy Opinions: A Survey Experiment," Working Papers 2021:04, Department of Economics, University of Venice "Ca' Foscari".
    58. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
    59. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 489-520.
    60. Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, vol. 97(2), pages 170-176, May.
    61. Dugar, Subhasish & Shahriar, Quazi, 2018. "Restricted and free-form cheap-talk and the scope for efficient coordination," Games and Economic Behavior, Elsevier, vol. 109(C), pages 294-310.
    62. Birkelund, Johan & Cherry, Todd L., 2020. "Institutional inequality and individual preferences for honesty and generosity," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 355-361.
    63. Kartik, Navin & Ottaviani, Marco & Squintani, Francesco, 2007. "Credulity, lies, and costly talk," Journal of Economic Theory, Elsevier, vol. 134(1), pages 93-116, May.
    64. Daniel Houser & Erte Xiao, 2011. "Classification of natural language messages using a coordination game," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 1-14, March.
    65. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    66. Palan, Stefan & Schitter, Christian, 2018. "Prolific.ac—A subject pool for online experiments," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 22-27.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tebbe, Eva & Wegener, Benjamin, 2022. "Is natural language processing the cheap charlie of analyzing cheap talk? A horse race between classifiers on experimental communication data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Khalmetski, Kiryl, 2019. "Evasion of guilt in expert advice," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 296-310.
    2. Attanasi, Giuseppe & Rimbaud, Claire & Villeval, Marie Claire, 2023. "Guilt aversion in (new) games: Does partners' payoff vulnerability matter?," Games and Economic Behavior, Elsevier, vol. 142(C), pages 690-717.
    3. Lang, Matthias & Schudy, Simeon, 2023. "(Dis)honesty and the value of transparency for campaign promises," European Economic Review, Elsevier, vol. 159(C).
    4. Roman Inderst & Kiryl Khalmetski & Axel Ockenfels, 2019. "Sharing Guilt: How Better Access to Information May Backfire," Management Science, INFORMS, vol. 65(7), pages 3322-3336, July.
    5. Serra Garcia, M. & van Damme, E.E.C. & Potters, J.J.M., 2010. "Which Words Bond? An Experiment on Signaling in a Public Good Game (replaced by CentER DP 2011-139)," Discussion Paper 2010-33, Tilburg University, Center for Economic Research.
    6. Woods, Daniel & Servátka, Maroš, 2016. "Testing psychological forward induction and the updating of beliefs in the lost wallet game," Journal of Economic Psychology, Elsevier, vol. 56(C), pages 116-125.
    7. Ederer, Florian & Stremitzer, Alexander, 2017. "Promises and expectations," Games and Economic Behavior, Elsevier, vol. 106(C), pages 161-178.
    8. repec:hal:wpaper:halshs-03620418 is not listed on IDEAS
    9. Giovanni Di Bartolomeo & Martin Dufwenberg & Stefano Papa, 2023. "Promises and partner-switch," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 9(1), pages 77-89, June.
    10. Khalmetski, Kiryl, 2016. "Testing guilt aversion with an exogenous shift in beliefs," Games and Economic Behavior, Elsevier, vol. 97(C), pages 110-119.
    11. Riccardo Ghidoni & Matteo Ploner, 2014. "When do the Expectations of Others Matter? An Experiment on Distributional Justice and Guilt Aversion," CEEL Working Papers 1403, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    12. Sanjit Dhami, 2017. "Human Ethics and Virtues: Rethinking the Homo-Economicus Model," CESifo Working Paper Series 6836, CESifo.
    13. Beck, Adrian & Kerschbamer, Rudolf & Qiu, Jianying & Sutter, Matthias, 2013. "Shaping beliefs in experimental markets for expert services: Guilt aversion and the impact of promises and money-burning options," Games and Economic Behavior, Elsevier, vol. 81(C), pages 145-164.
    14. Peeters, Ronald & Vorsatz, Marc & Walzl, Markus, 2015. "Beliefs and truth-telling: A laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 113(C), pages 1-12.
    15. Cartwright, Edward, 2019. "A survey of belief-based guilt aversion in trust and dictator games," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 430-444.
    16. Jacob Goeree & Jingjing Zhang, 2014. "Communication & competition," Experimental Economics, Springer;Economic Science Association, vol. 17(3), pages 421-438, September.
    17. Giuseppe Attanasi & Pierpaolo Battigalli & Elena Manzoni, 2016. "Incomplete-Information Models of Guilt Aversion in the Trust Game," Management Science, INFORMS, vol. 62(3), pages 648-667, March.
    18. Cary Deck & Maroš Servátka & Steven Tucker, 2013. "An examination of the effect of messages on cooperation under double-blind and single-blind payoff procedures," Experimental Economics, Springer;Economic Science Association, vol. 16(4), pages 597-607, December.
    19. Serra Garcia, M. & van Damme, E.E.C. & Potters, J.J.M., 2010. "Which Words Bond? An Experiment on Signaling in a Public Good Game (replaced by TILEC DP 2011-055)," Other publications TiSEM 5ed24dc3-e6cf-4fa4-bace-2, Tilburg University, School of Economics and Management.
    20. Loukas Balafoutas & Helena Fornwagner, 2017. "The limits of guilt," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(2), pages 137-148, December.
    21. Di Bartolomeo, Giovanni & Dufwenberg, Martin & Papa, Stefano & Passarelli, Francesco, 2019. "Promises, expectations & causation," Games and Economic Behavior, Elsevier, vol. 113(C), pages 137-146.

    More about this item

    Keywords

    Communication; Promises; Trust; Delegation; Lost-Wallet Game; Language Precision;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ver:wpaper:18/2017. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael Reiter (email available below). General contact details of provider: https://edirc.repec.org/data/isverit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.