An Experimental Study of Truth-Telling in a Sender-Receiver Game

A recent experimental study of Cai and Wang (2003) on strategic information transmission games reveals that subjects tend to transmit more information than predicted by the standard equilibrium analysis. To evidence that this overcommunication phenomenon can be explained in some situations in terms of a tension between normative social behavior and incentives for lying, we show that in a simple sender-receiver game subjects incurring in costs to punish liars tell the truth more often than predicted by the equilibrium analysis whereas subjects that do not punish liars after receiving a deceptive message play equilibrium strategies. Thus, we can partition the subject pool into two groups, one group of subjects with preferences for truth-telling and another group taking into account only economic incentives.Experiment, Sender-Receiver Game, Strategic Informa- tion Transmission, Truth-Telling.

Pinocchio's Pupil: Using Eyetracking and Pupil Dilation to Understand Truth Telling and Deception in Sender-Receiver Games

We report experiments on sender-receiver games with an incentive for senders to exaggerate. Subjects "overcommunicate" -- messages are more informative of the true state than they should be, in equilibrium. Eyetracking shows that senders look at payoffs in a way that is consistent with a level-k model. A combination of sender messages and lookup patterns predicts the true state about twice as often as predicted by equilibrium. Using these measures to infer the state would enable receiver subjects to hypothetically earn 16-21 percent more than they actually do, an economic value of 60 percent of the maximum increment

Costly and discrete communication: An experimental investigation

Language is an imperfect and uneven means of communicating information about a complex and nuanced world. We run an experimental investigation of a setting in which the messages available to the sender imperfectly describe the state of the world, however the sender can improve communication, at a cost, by increasing the complexity or elaborateness of the message. As is standard in the communication literature, the sender learns the state of the world then sends a message to the receiver. The receiver observes the message and provides a best guess about the state. The incentives of the players are aligned in the sense that both sender and receiver are paid an amount which is increasing in the accuracy of the receiver's guess. As would be expected, we find that larger communication costs are associated with worse outcomes for both sender and receiver. Consistent with the communication literature, albeit in very different setting, we find that there is overcommunication. For the receiver, there is a positive relationship between the payoffs relative to the equilibrium predictions and communication costs. This relationship is negative for the senders. We also find that the response time of both the sender and receiver are positively related to their payoffs.communication; cheap talk; overcommunication

Hiding an Inconvenient Truth: Lies and Vagueness (Revision of DP 2008-107)

When truth conflicts with efficiency, can verbal communication destroy efficiency? Or are lies or vagueness used to hide inconvenient truths? We consider a sequential 2-player public good game in which the leader has private information about the value of the public good. This value can be low, high, or intermediate, with the latter case giving rise to a prisoners dilemma. Without verbal communication, efficiency is achieved, with contributions for high or intermediate values. When verbal com- munication is added, the leader has an incentive to hide the precise truth when the value is intermediate. We show experimentally that, when communication about the value must be precise, the leader frequently lies, preserving efficiency by exaggerating. When communication can be vague, the leader turns to vague messages when the value is intermediate, but not when it is high. Thus, she implicitly reveals all values. Inter- estingly, efficiency is still preserved, since the follower ignores messages altogether and does not seem to realize that vague messages hide inconvenient truths.Communication;Efficiency;Lying;Public Goods.

Truth-telling and Trust in Sender-receiver Games with Intervention

Recent experimental studies find excessive truth-telling in strategic information transmission games with conflictive preferences. In this paper, we show that this phenomenon is more pronounced in sender-receiver games where a truthful regulator randomly intervenes. We also establish that intervention significantly increases the excessive trust of receivers.Strategic information transmission, truth-telling, trust, sender-receiver game.

Do Analysts Tell the Truth? Do Shareholders Listen? An Experimental Study of Analysts' Forecasts and Shareholder Reaction

This work experimentally examines forecasting and trading behavior. Subjects play the role of both analyst and shareholder over the course of experiments consisting of a series of repeated games with or absent con icts of interest. In a stylized trading setting, I test whether standard equilibrium, normative behavior, or limited strategic reasoning best predicts behavior. In the presence of con icts of interest a substantial proportion of subjects' behavior appears non-skeptical in the role of shareholder, though the same subject is deceptive in the role of analyst. Absent con icts of interest, subjects behavior in the role of shareholder is nearer a best response to the same subject's behavior as analyst. The results are consistent with limited strategic reasoning and suggest that simply disclosing con icts of interest does not evoke skepticism of forecasting, nor does the elimination of con icts of interest in itself induce honesty.Experimental finance, under-reaction, overreaction, behavior, price inertia, risk aversion

Do Analysts Tell the Truth? Do Shareholders Listen? An Experimental Study of Analysts\u27 Forecasts and Shareholder Reaction

This work experimentally examines forecasting and trading behavior. Subjects play the role of both analyst and shareholder over the course of experiments consisting of a series of repeated games with or absent conflicts of interest. In a stylized trading setting, I test whether standard equilibrium, normative behavior, or limited strategic reasoning best predicts behavior. In the presence of conflicts of interest a substantial proportion of subjects’ behavior appears non-skeptical in the role of shareholder, though the same subject is deceptive in the role of analyst. Absent conflicts of interest, subjects behavior in the role of shareholder is nearer a best response to the same subject’s behavior as analyst. The results are consistent with limited strategic reasoning and suggest that simply disclosing conflicts of interest does not evoke skepticism of forecasting, nor does the elimination of conflicts of interest in itself induce honesty

Ten possible experiments on communication and deception

I describe ten situations in which experimental data may provide useful guidance to the study of cheap-talk games. Journal of Economic Literature Classification Numbers: C92, D8. © 2013 Elsevier B.V