The Power and Limits of Sequential Communication

Economics

Speaker:Jeroen van de Ven, University of Amsterdam
Date: Friday 4 November 2016
Time: 15.30
Location: Matrix Lecture Theatre, Building One

Further details

We study theoretically and experimentally how effectively communication solves coordination problems. We do this in the context of games in which there are benefits of coordinating but there is also some conflict of interest (Battle-of-the-Sexes and Chicken). In contrast to existing studies, which typically implement one-way communication or two-way simultaneous communication, and restrict communication to pre-coded messages, we allow players to talk sequentially in free-format. We conjecture that people only perceive the resulting conversation as an agreement if the final messages are not conflicting and as long as none of the players is better off by disregarding the conversation. Under this assumption, we show theoretically that communication can be effective in Battle-of-the-Sexes but not in Chicken. Our experimental findings provide strong support for this prediction.