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Communication & competition*

* This paper is a replication of an original study

Author

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  • Jacob Goeree
  • Jingjing Zhang

Abstract

Charness and Dufwenberg (Am. Econ. Rev. 101(4):1211–1237, 2011 ) have recently demonstrated that cheap-talk communication raises efficiency in bilateral contracting situations with adverse selection. We replicate their main finding and extend their design to include competition between agents. We find that communication and competition act as “substitutes:” communication raises efficiency in the absence of competition but not with competition, and competition raises efficiency without communication but lowers efficiency with communication. We briefly review some behavioral theories that have been proposed in this context and show that each can explain some but not all features of the observed data patterns. Our findings highlight the fragility of cheap-talk communication and may serve as a guide to refine existing behavioral theories. Copyright Economic Science Association 2014

Suggested Citation

  • Jacob Goeree & Jingjing Zhang, 2014. "Communication & competition," Experimental Economics, Springer;Economic Science Association, vol. 17(3), pages 421-438, September.
    • Handle: RePEc:kap:expeco:v:17:y:2014:i:3:p:421-438
    DOI: 10.1007/s10683-013-9376-6
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    References listed on IDEAS

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    2. Läpple, Doris & Maertens, Annemie & Barham, Bradford L., 2023. "Communication and advice-taking: Evidence from a laboratory experiment," Economics Letters, Elsevier, vol. 228(C).
    3. Francisca Jiménez-Jiménez & Javier Rodero Cosano, 2021. "Experimental cheap talk games: strategic complementarity and coordination," Theory and Decision, Springer, vol. 91(2), pages 235-263, September.
    4. Casoria, Fortuna & Riedl, Arno & Werner, Peter, 2020. "Behavioral Aspects of Communication in Organizations," IZA Discussion Papers 13005, Institute of Labor Economics (IZA).
    5. Ling-Ling Li & Shi-Yu Wen & Ming-Lang Tseng & Anthony S. F. Chiu, 2020. "Photovoltaic array prediction on short-term output power method in Centralized power generation system," Annals of Operations Research, Springer, vol. 290(1), pages 243-263, July.
    6. Ninghua Du & Lingfang Li & Tian Lu & Xianghua Lu, 2020. "Prosocial Compliance in P2P Lending: A Natural Field Experiment," Management Science, INFORMS, vol. 66(1), pages 315-333, January.
    7. Casella, Alessandra & Kartik, Navin & Sanchez, Luis & Turban, Sébastien, 2018. "Communication in Context: Interpreting Promises in an Experiment on Competition and Trust," CEPR Discussion Papers 12709, C.E.P.R. Discussion Papers.
    8. Josh Cherry & Stephen Salant & Neslihan Uler, 2015. "Experimental departures from self-interest when competing partnerships share output," Experimental Economics, Springer;Economic Science Association, vol. 18(1), pages 89-115, March.
    9. Brosig-Koch, Jeannette & Heinrich, Timo, 2018. "The role of communication content and reputation in the choice of transaction partners," Games and Economic Behavior, Elsevier, vol. 112(C), pages 49-66.
    10. Siegenthaler, Simon, 2017. "Meet the lemons: An experiment on how cheap-talk overcomes adverse selection in decentralized markets," Games and Economic Behavior, Elsevier, vol. 102(C), pages 147-161.
    11. Priyodorshi Banerjee & P. Srikant & Sujoy Chakravarty, 2020. "Contracting Outcomes with Communication and Learning," Studies in Microeconomics, , vol. 8(1), pages 18-43, June.

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    Replication

    This item is a replication of:
  • Gary Charness & Martin Dufwenberg, 2011. "Participation," American Economic Review, American Economic Association, vol. 101(4), pages 1211-1237, June.

    • More about this item

    Keywords

    Cheap talk; Adverse selection; Competition; Guilt aversion; Lie aversion; Inequality aversion; Reciprocity; C92;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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