Miscommunication in an investment game

Abstract

To varying degrees, empirical evidence shows that non-binding messages (cheap talk) are effective in enhancing cooperative behaviors when simple games are augmented with a communication pre-stage. We focus on games where the interactions are more complex and test the effect of communication. Specifically, we consider an investment game, where players can send free-form messages before taking their choices. Differently from simple games, where subjects have just to choose whether to cooperate or not, we find that messages do not matter—on average. Our rationale is that misunderstandings are more likely to be observed in a context where the space of strategies is larger.