DP11206 Can there be a market for cheap-talk information? Some experimental evidence

Author(s): Antonio Cabrales, Francesco Feri, Piero Gottardi, Miguel A. Meléndez-Jiménez
Publication Date: March 2016
Keyword(s): Auction, cheap talk, Experiment, Information Acquisition, Information Sale
JEL(s): C72, D83, G14
Programme Areas: Labour Economics, Public Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11206

This paper reports on experiments testing the viability of markets for cheap talk information. We find that these markets are fragile. The reasons are surprising given the previous experimental results on cheap-talk games. Our subjects provide low-quality information even when doing so does not increase their monetary payoff. We show that this is not because subjects play a different (babbling) equilibrium. By analyzing subjects' behavior in another game, we find that those adopting deceptive strategies tend to have envious or non-pro-social traits. The poor quality of the information transmitted leads to a collapse of information markets.