Direct response and the strategy method in an experimental cheap talk game

William Minozzi and Jonathan Woon

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2020, vol. 85, issue C

Abstract: In cheap talk games, equilibrium analysis predicts extreme limits on the information that can be transmitted when senders and receivers have different goals. Yet experimental evidence suggests that senders overcommunicate relative to this baseline, revealing more information than predicted in equilibrium. We propose that overcommunication may be due in part to limited cognitive engagement by subjects, captured by level-k thinking. To test this conjecture, we compare two elicitation methods, direct response and the strategy method, holding other elements of the game fixed. Existing experimental studies of cheap talk games use the standard direct response method, while the strategy method—in which subjects make selections for all contingent choices—is believed to encourage more thoughtful decisionmaking. We therefore expect senders to transmit less information with the strategy method than with direct response. In contrast, we find the reverse: the strategy method increased overcommunication. Further examination suggests that this occurred because senders played more naïvely with the strategy method than with direct response. Our findings suggest that the strategy method and direct response do not elicit the same choices in cheap talk games.

Keywords: Strategic information transmission; Sender-receiver games; Strategy method; Laboratory experiment (search for similar items in EconPapers)
JEL-codes: C72 C92 D82 D83 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:85:y:2020:i:c:s2214804319300230

DOI: 10.1016/j.socec.2019.101498

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