Experimental cheap talk games: strategic complementarity and coordination

This paper investigates experimentally the effects of communication in distinct games with complete information. We design four games resulting from the interaction between two incentive elements: strategic complementarity and coordination. These incentive elements allow to analyse the use of cheap talk as an efficiency-enhancing and coordinating device. We implement a restricted communication protocol (one-sided, optional, and closed-form) in repeated settings with fixed partners. Our findings provide robust evidence about how cheap talk interacts with incentives to explain strategic behaviour in a dynamic way. As expected, cheap talk increases efficiency under complementarity incentives, and the coordination level under coordination incentives. As novelty, the use of limited communication in repeated interactions has led to identify specific time-varying message profiles as the most effective messages in the coordination games. While the content of messages is explained by the complementarity incentives, faithfulness to credible messages is determined by the coordination incentives.

Automated summary

This experimental study demonstrates that the use of cheap talk in games can improve efficiency and coordination. The impact of communication in different games depends on incentive factors, with specific time-varying message profiles being particularly effective in coordination games.