Hostname: page-component-7b9c58cd5d-7g5wt Total loading time: 0 Render date: 2025-03-15T16:13:31.871Z Has data issue: false hasContentIssue false
  • English
  • Français

Pre-play communication with forgone costly messages: experimental evidence on forward induction

Published online by Cambridge University Press:  14 March 2025

Andreas Blume ,
Peter H. Kriss  and
Roberto A. Weber
Andreas Blume
Affiliation:
Department of Economics, University of Arizona, Tucson, AZ, USA
Peter H. Kriss
Affiliation:
Medallia, Inc., Palo Alto, CA, USA
Roberto A. Weber*
Affiliation:
Department of Economics, University of Zurich, Blümlisalpstrasse 10, 8006 Zurich, Switzerland
*
[email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

We experimentally study optional costly communication in Stag-Hunt games. Prior research demonstrates that efficient coordination is difficult without a communication option but obtains regularly with mandatory costless pre-play messages. We find that even small communication costs dramatically reduce message use when communication is optional, but efficient coordination can occur with similar frequency as under costless communication. These findings can be accounted for by formalizations of forward induction that take Nash equilibrium as a reference point (such as Kohlberg and Mertens in Econometrica 54: 1003–1037, 1986; Govindan and Wilson in Econometrica 77: 1–28, 2009), while formalizations that only appeal to (higher-order) knowledge of rationality remain silent in this environment.

Keywords

CoordinationCommunicationForward inductionExperimentStag huntC72C92D83
Type
Original Paper
Information
Experimental Economics , Volume 20 , Issue 2 , June 2017 , pp. 368 - 395
Copyright
Copyright © 2016 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-016-9487-y) contains supplementary material, which is available to authorized users.

References

Anderson, S, Goeree, J, & Holt, C (2001). Minimum-effort coordination games: Stochastic potential and logit equilibrium. Games and Economic Behavior, 34(2), 177–199. 10.1006/game.2000.0800CrossRefGoogle Scholar
Andersson, O, & Holm, H (2013). Speech is silver, silence is golden. Games, 4(3), 497–507. 10.3390/g4030497CrossRefGoogle Scholar
Asheim, GB, & Dufwenberg, M (2003). Deductive reasoning in extensive games. The Economic Journal, 113, 305–325. 10.1111/1468-0297.00121CrossRefGoogle Scholar
Basu, K, & Weibull, JW (1991). Strategy subsets closed under rational behavior. Economics Letters, 36, 141–146. 10.1016/0165-1765(91)90179-OCrossRefGoogle Scholar
Battigalli, P, & Siniscalchi, M (2002). Strong belief and forward induction reasoning. Journal of Economic Theory, 106, 356–391. 10.1006/jeth.2001.2942CrossRefGoogle Scholar
Ben-Porath, E, & Dekel, E (1992). Signaling future actions and the potential for sacrifice. Journal of Economic Theory, 57, 36–51. 10.1016/S0022-0531(05)80039-0CrossRefGoogle Scholar
Blume, A (1998). Communication, risk and efficiency in games. Games and Economic Behavior, 22, 171–202. 10.1006/game.1997.0598CrossRefGoogle Scholar
Blume, A, & Gneezy, U (2010). Cognitive forward induction and coordination without common knowledge: An experimental study. Games and Economic Behavior, 68, 488–511. 10.1016/j.geb.2009.07.011CrossRefGoogle Scholar
Blume, A, & Ortmann, A (2007). The effects of costless pre-play communication: Experimental evidence from games with pareto-ranked equilibria. Journal of Economic Theory, 132(1), 274–290. 10.1016/j.jet.2005.03.001CrossRefGoogle Scholar
Brandenburger, A, Friedenberg, A, & Keisler, J (2008). Admissibility in games. Econometrica, 76, 307–352. 10.1111/j.1468-0262.2008.00835.xCrossRefGoogle Scholar
Brandts, J, & Cooper, D (2006). A change would do you good: An experimental study on how to overcome coordination failure in organizations. American Economic Review, 93(1), 669–693. 10.1257/aer.96.3.669CrossRefGoogle Scholar
Brandts, J, & Cooper, D (2007). It’s what you say, not what you pay: An experimental study of manager-employee relationships in overcoming coordination failure. Journal of the European Economic Association, 5(6), 1223–1268. 10.1162/JEEA.2007.5.6.1223CrossRefGoogle Scholar
Brandts, J, & Holt, CA (1995). Limitations of dominance and forward induction: Experimental evidence. Economics Letters, 49, 391–395. 10.1016/0165-1765(95)00706-LCrossRefGoogle Scholar
Bryant, J (1983). A simple rational-expectations Keynes-type model. Quarterly Journal of Economics, 98, 525–529. 10.2307/1886025CrossRefGoogle Scholar
Burton, A., Loomes, G., & Sefton, M. (2005). Communication and efficiency in coordination game experiments. In Morgan, J. (Ed.), Experimental and behavioral economics. Advances in applied microeconomics, Vol. 13 (pp. 63–86). Amsterdam: JAI Press.Google Scholar
Cachon, GP, & Camerer, CF (1996). Loss-avoidance and forward induction in experimental coordination games. Quarterly Journal of Economics, 111, 165–194. 10.2307/2946661CrossRefGoogle Scholar
Camerer, CF (2003). Behavioral game theory: Experiments in strategic interaction, Princeton: Princeton University Press.Google Scholar
Charness, G (2000). Self-serving cheap talk: A test of Aumann’s conjecture. Games and Economic Behavior, 33(2), 177–194. 10.1006/game.1999.0776CrossRefGoogle Scholar
Chaudhuri, A, Schotter, A, & Sopher, B (2009). Talking ourselves to efficiency: Coordination in inter-generational minimum-effort games with private, almost common and common knowledge of advice. Economic Journal, 119, 91–122.CrossRefGoogle Scholar
Cooper, R, DeJong, D, Forsythe, R, & Ross, T (1990). Selection criteria in coordination games: Some experimental results. American Economic Review, 80, 218–233.Google Scholar
Cooper, R., DeJong, D. V., Forsythe, R., & Ross, T. W. (1991). Forward induction in the battle of the sexes game. Working paper (University of Iowa, Iowa City, IA).Google Scholar
Cooper, R, DeJong, D, Forsythe, R, & Ross, T (1992). Communication in coordination games. The Quarterly Journal of Economics, 107(2), 739–771. 10.2307/2118488CrossRefGoogle Scholar
Cooper, R, DeJong, D, Forsythe, R, & Ross, T (1992). Forward induction in coordination games. Economics Letters, 40, 167–172. 10.1016/0165-1765(92)90217-MCrossRefGoogle Scholar
Cooper, R, DeJong, DV, Forsythe, R, Ross, TW, & Friedman, JW (1994). Alternative institutions for resolving coordination problems: Experimental evidence on forward induction and preplay communication. Problems of coordination in economic activity, Boston: Kluwer Economic Publishers.Google Scholar
Demichelis, S, & Weibull, JW (2008). Language, meaning, and games: A model of communication coordination and evolution. American Economic Review, 98(4), 1292–1311. 10.1257/aer.98.4.1292CrossRefGoogle Scholar
Devetag, G, & Ortmann, A (2007). When and why? A critical review of coordination failure in the laboratory. Experimental Economics, 10(3), 331–344. 10.1007/s10683-007-9178-9CrossRefGoogle Scholar
Duffy, J, & Feltovich, N (2002). Do actions speak louder than words? An experimental comparison of observation and cheap talk. Games and Economic Behavior, 39(1), 1–27. 10.1006/game.2001.0892CrossRefGoogle Scholar
Ellingsen, T, & Östling, R (2010). When does communication improve coordination?. American Economic Review, 100(4), 1695–1724. 10.1257/aer.100.4.1695CrossRefGoogle Scholar
Farrell, J (1987). Cheap talk, coordination, and entry. The Rand Journal of Economics, 18(1), 34–39. 10.2307/2555533CrossRefGoogle Scholar
Farrell, J (1988). Communication, coordination, and nash equilibrium. Economics Letters, 27, 209–214. 10.1016/0165-1765(88)90172-3CrossRefGoogle Scholar
Farrell, J, & Rabin, M (1996). Cheap-talk. Journal of Economic Perspectives, 10, 103–118. 10.1257/jep.10.3.103CrossRefGoogle Scholar
Fehr, D. (2011). The persistence of ‘bad’ precedents and the need for communication: A coordination experiment. Sonderforschungsbereich (SFB) 649 Discussion Paper 2011–039.Google Scholar
Fischbacher, U (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171–178. 10.1007/s10683-006-9159-4CrossRefGoogle Scholar
Govindan, S, & Wilson, R (2009). On forward induction. Econometrica, 77, 1–28. 10.3982/ECTA6956Google Scholar
Harsanyi, J, & Selten, R (1988). A general theory of equilibrium selection in games, Cambridge, MA: MIT Press.Google Scholar
Hirschleifer, J (1983). From weakest-link to best-shot: The voluntary provision of public goods. Public Choice, 41(3), 371–386. 10.1007/BF00141070CrossRefGoogle Scholar
Huck, S, & Mueller, W (2005). Burning money and (Pseudo) first-mover advantages: An experimental study on forward induction. Games and Economic Behavior, 51, 109–127. 10.1016/j.geb.2004.03.006CrossRefGoogle Scholar
Hurkens, S (1996). Multi-sided pre-play communication by burning money. Journal of Economic Theory, 69, 186–197. 10.1006/jeth.1996.0043CrossRefGoogle Scholar
Kalai, E, & Samet, D (1984). Persistent equilibria. International Journal of Game Theory, 13, 129–144. 10.1007/BF01769811CrossRefGoogle Scholar
Kim, Y-G, & Sobel, J (1995). An evolutionary approach to pre-play communication. Econometrica, 63(5), 1181–1193. 10.2307/2171726CrossRefGoogle Scholar
Knez, M., & Camerer, C. F. (1994). Creating expectational assets in the laboratory: Coordination in ‘weakest- link’ games. Strategic Management Journal, Vol. 15, Special Issue: Competitive Organizational Behavior) 101–119.CrossRefGoogle Scholar
Kogan, S, Kwasnica, AM, & Weber, RA (2011). Coordination in the presence of asset markets. American Economic Review, 101(2), 927–947. 10.1257/aer.101.2.927CrossRefGoogle Scholar
Kohlberg, E. (1981). Some problems with the concept of perfect equilibrium. In NBER conference on the theory of general economic equilibrium, University of California, Berkeley.Google Scholar
Kohlberg, E Ichiishi, Tatsuro, Neyman, Abraham, & Tauman, Yair (1991). Refinement of Nash Equilibrium: The Main Ideas. Game theory and applications, San Diego: Academic Press.Google Scholar
Kohlberg, E, & Mertens, J (1986). On the strategic stability of equilibria. Econometrica, 54, 1003–1037. 10.2307/1912320CrossRefGoogle Scholar
Kriss, P. H., Blume, A., & Weber, R. A. (2016). Coordination with decentralized costly communication. University of Zurich Working Paper.CrossRefGoogle Scholar
Manzini, P, Sadrieh, A, & Vriend, NJ (2009). On smiles, winks and handshakes as coordination devices. The Economic Journal, 119, 826–854. 10.1111/j.1468-0297.2009.02253.xCrossRefGoogle Scholar
McKelvey, R, & Palfrey, T (1995). Quantal response equilibria for normal form games. Games and Economic Behavior, 10(1), 6–38. 10.1006/game.1995.1023CrossRefGoogle Scholar
Pearce, DG (1984). Strategic behavior and the problem of perfection. Econometrica, 52, 1029–1050. 10.2307/1911197CrossRefGoogle Scholar
Rabin, M (1994). A model of pre-game communication. Journal of Economic Theory, 63(2), 370–391. 10.1006/jeth.1994.1047CrossRefGoogle Scholar
Shurchkov, O (2016). Public announcements and coordination in dynamic global games: Experimental evidence. Journal of Behavioral and Experimental Economics, 61, 20–30. 10.1016/j.socec.2016.01.004CrossRefGoogle Scholar
van Damme, E (1989). Stable equilibria and forward induction. Journal of Economic Theory, 48, 476–496. 10.1016/0022-0531(89)90038-0CrossRefGoogle Scholar
Van Huyck, J, Battalio, R, & Beil, R (1990). Tacit coordination games, strategic uncertainty, and coordination failure. American Economic Review, 80, 234–248.Google Scholar
Van Huyck, J, Battalio, R, & Beil, R (1993). Asset markets as an equilibrium selection mechanism: Coordination failure, game form auctions, and forward induction. Games and Economic Behavior, 5, 485–504. 10.1006/game.1993.1026CrossRefGoogle Scholar
Weber, R (2006). Managing growth to achieve efficient coordination in large groups. American Economic Review, 96(1), 114–126. 10.1257/000282806776157588CrossRefGoogle Scholar
Weber, R, Camerer, C, Rottenstreich, Y, & Knez, M (2001). The illusion of leadership: Misattribution of cause in coordination games. Organizational Science, 12(5), 582–598. 10.1287/orsc.12.5.582.10090CrossRefGoogle Scholar
Supplementary material: File

Blume et al. supplementary material

Blume et. al. supplementary material
Download Blume et al. supplementary material(File)
File 4.9 MB