Money talks? An Experimental Investigation of Cheap Talk and Burned Money

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 11-069/1

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Asymmetric and Private Information; Mechanism Design
• Subject: cheap talk ; burning money ; lying costs ; experiment ; Informationsverhalten ; Informationsverbreitung ; Asymmetrische Information ; Test

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): de Haan, Thomas ; Offerman, Theo ; Sloof, Randolph
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/86989
• Last update: 10.03.2025, 11:41 AM CET