Overcommunication in strategic information transmission games

Abstract: In this paper we conduct laboratory experiments to test the Crawford and Sobel [Crawford, V., Sobel, J., 1982. Strategic information transmission. Econometrica 50, 1431–1451] theory of strategic information transmission. Our experimental results strongly support the basic insight of the theory, namely, that less information is transmitted when preferences of the sender and the receiver diverge. Moreover, the average payoffs for the senders, the receivers, and the overall subject population are very close to those predicted by the most informative equilibrium. However, the evidence shows that subjects  consistently  overcommunicate  in  that  the  senders' messages are  more  informative  about the true states of the world and that the receivers rely more on the senders' messages in choosing actions, compared with what the theory allows in the most informative equilibrium. To understand the overcommunication phenomenon, we use two popular approaches of bounded rationality: behavior type analysis and quantal response equilibrium, to analyze subjects’ behavior in our experiment data.

Keywords: Overcommunication; Communication games; Bounded rationality

Overcommunication in strategic information transmission games.pdf