Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86989
Authors: 
de Haan, Thomas
Offerman, Theo
Sloof, Randolph
Year of Publication: 
2011
Series/Report no.: 
Tinbergen Institute Discussion Paper 11-069/1
Abstract: 
We experimentally study the strategic transmission of information in a setting where both cheap talk and money can be used for communication purposes. Theoretically a large number of equilibria exist side by side, in which senders either use costless messages, money, or a combination of the two. We find that senders prefer to communicate through costless messages. Only when the interest disalignment between sender and receiver increases, cheap talk tends to break down and high sender types start burning money to enhance the credibility of their costless messages. A behavioral model due to Kartik (2009) assuming that sellers bear a cost of lying fits the data best.
Subjects: 
cheap talk
burning money
lying costs
experiment
JEL: 
C91
D82
Document Type: 
Working Paper

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