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How cheap talk enhances efficiency in threshold public goods games

Palfrey, Thomas and Rosenthal, Howard and Roy, Nilanjan (2017) How cheap talk enhances efficiency in threshold public goods games. Games and Economic Behavior, 101 . pp. 234-259. ISSN 0899-8256.

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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. Individuals can each make a discrete contribution. If the number of contributors is at least equal to the threshold, 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:Article
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URLURL TypeDescription
Palfrey, Thomas0000-0003-0769-8109
Additional Information:© 2016 Elsevier Inc. Received 15 January 2015, Available online 23 October 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 (SES-1158), and the Russell Sage Foundation. Kirill Pogorelskiy provided excellent research assistance. We especially thank John Ledyard for valuable comments on the theoretical section that extends earlier joint work by Ledyard and Palfrey. The usual caveat applies.
Funding AgencyGrant Number
Gordon and Betty Moore FoundationSES-1158
Russell Sage FoundationUNSPECIFIED
Subject Keywords:Communication; Cheap talk; Message space; Public good provision
Classification Code:JEL: C72; C92; D82; D83; H41
Record Number:CaltechAUTHORS:20170418-110358624
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Official Citation:Thomas Palfrey, Howard Rosenthal, Nilanjan Roy, How cheap talk enhances efficiency in threshold public goods games, Games and Economic Behavior, Volume 101, January 2017, Pages 234-259, ISSN 0899-8256, (
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:76633
Deposited By: Tony Diaz
Deposited On:18 Apr 2017 18:22
Last Modified:22 Nov 2019 09:58

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