Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/185357 
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers No. 11897
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Case studies of cartels and recent theory suggest that repeated communication is key for stable cooperation in environments where signals about others' actions are noisy. However, empirically the exact role of communication is not well understood. We study cooperation under different monitoring and communication structures in the laboratory. Under all monitoring structures - perfect, imperfect public, and imperfect private - communication boosts efficiency. However, under imperfect monitoring, where actions can only be observed with noise, cooperation is stable only when subjects can communicate before every round of the game. Beyond improving coordination, communication increases efficiency by making subjects' play more lenient and forgiving. We further find clear evidence for the exchange of private information - the central role ascribed to communication in recent theoretical contributions.
Subjects: 
infinitely repeated games
monitoring
communication
cooperation
strategic uncertainty
prisoner's dilemma
JEL: 
C72
C73
C92
D83
Document Type: 
Working Paper

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