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Power and the Privilege of Clarity: An Analysis of Bargaining Power and Information Transmission

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Listed:
  • Adrian de Groot Ruiz

    (University of Amsterdam)

  • Theo Offerman

    (University of Amsterdam)

  • Sander Onderstal

    (University of Amsterdam)

Abstract

We provide a game theoretic analysis of how power shapes the clarity of communication. We analyze information transmission in a cheap talk bargaining game between an informed Sender and an uninformed Receiver. Theoretically, we find that the maximum amount of information that can be transmitted in equilibrium is increasing in the bargaining power of the Sender relative to that of the Receiver. Using the ACDC-selection criterion, which selects a unique most-informative equilibrium, we predict that information transmission is increasing in the Sender's relative bargaining power. This prediction is corroborated by an experiment. Finally, we show how partial information transmission can lead to communication failure, and show how and under which conditions a delegation mechanism can solve this problem.

Suggested Citation

  • Adrian de Groot Ruiz & Theo Offerman & Sander Onderstal, 2011. "Power and the Privilege of Clarity: An Analysis of Bargaining Power and Information Transmission," Tinbergen Institute Discussion Papers 11-055/1, Tinbergen Institute, revised 31 Oct 2011.
    • Handle: RePEc:tin:wpaper:20110055
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    References listed on IDEAS

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    More about this item

    Keywords

    Cheap Talk; Bargaining Power; Information Transmission; Experiment;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual 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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