Money talks? An Experimental Investigation of Cheap Talk and Burned Money

Thomas de Haan (), Theo Offerman () and Randolph Sloof
Additional contact information
Thomas de Haan: University of Amsterdam
Theo Offerman: University of Amsterdam

No 11-069/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Published in the 'International Economic Review' .

We experimentally study the strategic transmission of information in a setting where both cheap talk and money can be used for communication purposes. Theoretically a large number of equilibria exist side by side, in which senders either use costless messages, money, or a combination of the two. We find that senders prefer to communicate through costless messages. Only when the interest disalignment between sender and receiver increases, cheap talk tends to break down and high sender types start burning money to enhance the credibility of their costless messages. A behavioral model due to Kartik (2009) assuming that sellers bear a cost of lying fits the data best.

Keywords: cheap talk; burning money; lying costs; experiment (search for similar items in EconPapers)
JEL-codes: C91 D82 (search for similar items in EconPapers)
Date: 2011-04-18
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://papers.tinbergen.nl/11069.pdf (application/pdf)

Related works:
Journal Article: MONEY TALKS? AN EXPERIMENTAL INVESTIGATION OF CHEAP TALK AND BURNED MONEY (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20110069

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