DP12709 Communication in Context: Interpreting Promises in an Experiment on Competition and Trust

Author(s): Alessandra Casella, Navin Kartik, Luis Sanchez, S├ębastien Turban
Publication Date: February 2018
Keyword(s): Bargaining, cheap talk, Dictator Game, Guilt-aversion, Lying, trust game
JEL(s): C9, D64, D83, D9
Programme Areas: Public Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12709

How much do people lie, and how much do people trust communication when lying is possible? An important step towards answering these questions is understanding how communication is interpreted. This paper establishes in a canonical experiment that competition can alter the shared communication code: the commonly understood meaning of messages. We study a Sender-Receiver game in which the Sender dictates how to share $10 with the Receiver, if the Receiver participates. The Receiver has an outside option and decides whether to participate after receiving a non-binding offer from the Sender. Competition for play between Senders leads to higher offers but has no effect on actual transfers, expected transfers, or Receivers' willingness to play. The higher offers signal that sharing will be equitable without the expectation that they should be followed literally: under competition "6 is the new 5".