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Published March 4, 2016 | Accepted Version
Report Open

How Cheap Talk Enhances Efficiency in Public Goods Games


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.

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.

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Accepted Version - SSWP_1400.pdf


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August 20, 2023
August 20, 2023