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Pre-play communication with forgone costly messages: experimental evidence on forward induction


Blume, Andreas; Kriss, Peter H; Weber, Roberto A (2017). Pre-play communication with forgone costly messages: experimental evidence on forward induction. Experimental Economics, 20(2):368-395.

Abstract

We experimentally study optional costly communication in Stag-Hunt games. Prior research demonstrates that efficient coordination is difficult without a communication option but obtains regularly with mandatory costless pre-play messages. We find that even small communication costs dramatically reduce message use when communication is optional, but efficient coordination can occur with similar frequency as under costless communication. These findings can be accounted for by formalizations of forward induction that take Nash equilibrium as a reference point (such as Kohlberg and Mertens (1986) and Govindan and Wilson (2009)), while formalizations that only appeal to (higher-order) knowledge of rationality remain silent in this environment.

Abstract

We experimentally study optional costly communication in Stag-Hunt games. Prior research demonstrates that efficient coordination is difficult without a communication option but obtains regularly with mandatory costless pre-play messages. We find that even small communication costs dramatically reduce message use when communication is optional, but efficient coordination can occur with similar frequency as under costless communication. These findings can be accounted for by formalizations of forward induction that take Nash equilibrium as a reference point (such as Kohlberg and Mertens (1986) and Govindan and Wilson (2009)), while formalizations that only appeal to (higher-order) knowledge of rationality remain silent in this environment.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Coordination, communication, forward induction, experiment, stag hunt
Language:English
Date:2017
Deposited On:06 Jul 2016 12:23
Last Modified:18 Jun 2017 00:00
Publisher:Springer
ISSN:1386-4157
Publisher DOI:https://doi.org/10.1007/s10683-016-9487-y

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