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Information Transmission under the Shadow of the Future: An Experiment†

Information Transmission under the Shadow of the Future: An Experiment† AbstractWe experimentally examine how information transmission functions in an ongoing relationship. Where the one-shot cheap-talk literature documents substantial overcommunication and preferences for honesty, the outcomes in our repeated setting are more consistent with uninformative babbling outcomes. This is particularly surprising, as honest revelation is supportable as an equilibrium outcome in our repeated setting. We show that inefficient outcomes are driven by a coordination failure on how to distribute the gains from information sharing. However, when agents can coordinate on the payment of an “information rent,” honest revelation emerges. (JEL C92, D83) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Information Transmission under the Shadow of the Future: An Experiment†

Information Transmission under the Shadow of the Future: An Experiment†

American Economic Journal: Microeconomics , Volume 12 (4) – Nov 1, 2020

Abstract

AbstractWe experimentally examine how information transmission functions in an ongoing relationship. Where the one-shot cheap-talk literature documents substantial overcommunication and preferences for honesty, the outcomes in our repeated setting are more consistent with uninformative babbling outcomes. This is particularly surprising, as honest revelation is supportable as an equilibrium outcome in our repeated setting. We show that inefficient outcomes are driven by a coordination failure on how to distribute the gains from information sharing. However, when agents can coordinate on the payment of an “information rent,” honest revelation emerges. (JEL C92, D83)

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Publisher
American Economic Association
Copyright
Copyright © 2020 © American Economic Association
ISSN
1945-7685
DOI
10.1257/mic.20170403
Publisher site
See Article on Publisher Site

Abstract

AbstractWe experimentally examine how information transmission functions in an ongoing relationship. Where the one-shot cheap-talk literature documents substantial overcommunication and preferences for honesty, the outcomes in our repeated setting are more consistent with uninformative babbling outcomes. This is particularly surprising, as honest revelation is supportable as an equilibrium outcome in our repeated setting. We show that inefficient outcomes are driven by a coordination failure on how to distribute the gains from information sharing. However, when agents can coordinate on the payment of an “information rent,” honest revelation emerges. (JEL C92, D83)

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Nov 1, 2020

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