Credible communication and cooperation: Experimental evidence from multi-stage Games |
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Authors: | Ola Andersson Erik Wengström |
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Institution: | a The Research Institute of Industrial Economics (IFN), P.O. Box 55665, SE-102 15 Stockholm, Sweden b Department of Economics, Lund University and Department of Economics, University of Copenhagen, Øster Farimagsgade 5, Building 26, DK-1353, Copenhagen K, Denmark |
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Abstract: | It is well known that communication often serves as a facilitator for cooperation in static games. Yet, communication can serve entirely different purposes in dynamic settings as communication during the game may work as a means for renegotiation, potentially undermining the credibility of cooperative strategies. To explore this issue, this paper experimentally investigates cooperation and non-binding communication in a two-stage game. More specifically, two treatments are considered: one with only pre-play communication and one where subjects can also communicate intra-play between the stages of the game. The results highlight a nontrivial difference concerning the effects of pre-play communication between the two treatments. Sending or receiving pre-play messages has a positive and significant effect on cooperation if there is no possibility of intra-play communication. However, this effect is significantly reduced when when intra-play communication is allowed. The results suggest that the credibility of pre-play messages may depend crucially on future communication opportunities. |
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Keywords: | C92 C72 |
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