Does cheap talk promote coordination under asymmetric information? An experimental study on global games

DOI DOI Web Site Web Site Research Data 1 Citations 33 References

Search this article

Description

This study experimentally investigates the role of two-sided cheap talk in decisions under asymmetric information. Unlike previous studies, our study also considers endogenous investment timing. In our experiments, subjects play two-player global games with asymmetric information. Before making any decision, a subject sends the other player in the same group a free message that takes the form of a continuous numerical value. We observe that subjects tend to send messages that accurately reflect their own private signals. This tendency is stronger when a subject can observe the other player's decision by delaying his own decision at a small cost. Further, our data present some evidence that subjects tend to reach a fully revealing equilibrium by using threshold strategies according to their own private signals and the other players' messages. We also observe that a subject’s welfare improves significantly under such cheap talk.

Journal

Citations (1)*help

See more

References(33)*help

See more

Related Data

See more

Related Projects

See more

Report a problem

Back to top