Authority and communication in the laboratory
Ernest K. Lai and
Wooyoung Lim ()
Games and Economic Behavior, 2012, vol. 74, issue 2, 541-560
We report findings from experiments on two delegation–communication games. An uninformed principal chooses whether to fully delegate her decision-making authority to an informed agent or to retain the authority and communicate with the agent via cheap talk to obtain decision-relevant information. In the game in which the delegation outcome is payoff-dominated by both the truthful and the babbling communication outcomes, we find that principal-subjects almost always retain their authority and agent-subjects communicate truthfully. Significantly more choices of delegation than of communication are observed in another game in which the delegation outcome payoff-dominates the unique babbling communication outcome; yet there is a non-negligible fraction of principal-subjects who holds on to their authority and agent-subjects who transmits some information. A level-k analysis of the game indicates that a principal-subject “under-delegates” due to the belief that her less-than-fully-strategic opponent will provide information; such belief is in turn consistent with the actual play.
Keywords: Cheap-talk communication; Decision-making authority; Delegation; Laboratory experiment; Level-k model (search for similar items in EconPapers)
JEL-codes: C72 C92 D82 D83 (search for similar items in EconPapers)
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