The Power of Words: Why Communication fosters Cooperation and Efficiency

Raúl López-Pérez

No 2009/01, Working Papers in Economic Theory from Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History)

Abstract: We present a game-theoretical model that accounts for abundant experimental evidence from games with non-binding communication (‘cheap talk’). It is based on two key ideas: People are conditionally averse to break norms of honesty and fairness (i.e., the emotional cost of breaking a norm is low if few people comply), and heterogeneous with regard to their concern for norms. The model explains (a) why cooperation in social dilemmas rises if players can previously announce their intended play, (b) why details of the communication protocol like the number of message senders and the order in which players communicate affect cooperation, (c) why players in sender-receiver games tend to transmit more information than a standard analysis would predict, and (d) why senders of false messages are often sanctioned if punishment is available.

Keywords: Communication; Cooperation; Fairness; Heterogeneity; Honesty; Reciprocity; Social Norms (search for similar items in EconPapers)
JEL-codes: C72 D01 D62 D64 Z13 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2009-01
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-gth and nep-soc
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