Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86916
Authors: 
de Groot Ruiz, Adrian
Offerman, Theo
Onderstal, Sander
Year of Publication: 
2011
Series/Report no.: 
Tinbergen Institute Discussion Paper 11-055/1
Abstract: 
We provide a game theoretic analysis of how power shapes the clarity of communication. We analyze information transmission in a cheap talk bargaining game between an informed Sender and an uninformed Receiver. Theoretically, we find that the maximum amount of information that can be transmitted in equilibrium is increasing in the bargaining power of the Sender relative to that of the Receiver. Using the ACDC-selection criterion, which selects a unique most-informative equilibrium, we predict that information transmission is increasing in the Sender's relative bargaining power. This prediction is corroborated by an experiment. Finally, we show how partial information transmission can lead to communication failure, and show how and under which conditions a delegation mechanism can solve this problem.
Subjects: 
Cheap Talk
Bargaining Power
Information Transmission
Experiment
JEL: 
C72
C91
D82
D83
Document Type: 
Working Paper

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