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Costly Communication in Groups: Theory and an Experiment

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  • Alistair Wilson

Abstract

I develop a novel model of group-based deliberation in which communication is costly in two directions: agents must pay separate costs to send and to receive messages. Equilibrium strategies have an intuitive characterization - those with the best information send, those with the worst information receive. But free-riding leads to less information exchange than is optimal. Testing the model's predictions with an experiment I find that subjects overcommunicate when costs are high, but fail to benefit from this as much as they should. In welfare terms the experiment finds that listening costs are more harmful to welfare, in contrast with theory, which indicates sending costs. The experiment also suggests that the existence of costly communication channels can reduce total welfare.

Suggested Citation

  • Alistair Wilson, 2011. "Costly Communication in Groups: Theory and an Experiment," Working Paper 488, Department of Economics, University of Pittsburgh, revised Jul 2012.
    • Handle: RePEc:pit:wpaper:488
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    File URL: http://www.pitt.edu/~alistair/CostlyCommunication.pdf
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    References listed on IDEAS

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    Cited by:

    1. Dietrichson, Jens & Gudmundsson, Jens & Jochem, Torsten, 2014. "Let's Talk It Over: Communication and Coordination in Teams," Working Papers 2014:2, Lund University, Department of Economics, revised 18 Apr 2018.
    2. Dietrichson, Jens & Jochem, Torsten, 2014. "Organizational coordination and costly communication with boundedly rational agents," Comparative Institutional Analysis Working Paper Series 2014:1, Lund University, Comparative Institutional Analysis, School of Economics and Management.

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    More about this item

    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
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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