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How Cheap Talk Enhances Efficiency in Public Goods Games

Palfrey, Thomas R. and Rosenthal, Howard and Roy, Nilanjan (2015) How Cheap Talk Enhances Efficiency in Public Goods Games. Social Science Working Paper, 1400. California Institute of Technology , Pasadena, CA.

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This paper uses a Bayesian mechanism design approach to investigate the effects of communication in a threshold public goods game. Individuals have private information about contribution costs. If at least some fraction of the group make a discrete contribution, a public benefit accrues to all members of the group. We experimentally implement three different communication structures prior to the decision move: (a) simultaneous exchange of binary messages, (b) larger finite numerical message space and (c) unrestricted text chat. We obtain theoretical bounds on the efficiency gains that are obtainable under these different communication structures. In an experiment with three person groups and a threshold of two, we observe significant efficiency gains only with the richest of these communication structures, where participants engage in unrestricted text chatting. In that case, the efficiency bounds implied by mechanism design theory are achieved.

Item Type:Report or Paper (Working Paper)
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URLURL TypeDescription ItemPublished Article
Palfrey, Thomas R.0000-0003-0769-8109
Additional Information:January 15, 2015. We are grateful for comments from seminar audiences at several universities and conferences. We acknowledge the financial support of grants from the National Science Foundation (SES-0962802 and SES-1426560), the Gordon and Betty Moore Foundation, and the Russell Sage Foundation. We are grateful to John Ledyard for valuable comments on the theoretical section. Kirill Pogorelskiy provided excellent research assistance. The usual caveat applies.
Group:Social Science Working Papers
Funding AgencyGrant Number
Gordon and Betty Moore FoundationUNSPECIFIED
Russell Sage FoundationUNSPECIFIED
Subject Keywords:Communication, cheap talk, message space, public good provision
Series Name:Social Science Working Paper
Issue or Number:1400
Classification Code:JEL Classification Numbers: C72, C92, D82, D83, H41
Record Number:CaltechAUTHORS:20160301-120023499
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:64911
Deposited By: Susan Vite
Deposited On:04 Mar 2016 22:49
Last Modified:22 Nov 2019 09:58

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