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Community-led initiatives can play an important role in reducing the barriers to the adoption of energy-saving measures in homes. Quantitative insights about the role of communities and their leaders in energy transition are largely missing however. This paper exploits unique data on 78 community-led retrofitting campaigns run during 2014–2020 in the Netherlands, and studies econometrically the role of block leaders — the residents who managed the communities. Special focus lies on the analysis of the peer externalities that block leaders exerted on other community members. Contrary to much of the literature, peer externalities here are not driven by visibility and imitation, but by offering access to information and by cheap talk. The results show evidence of a spatial distance decay in peer effects, with the largest effect within 200 m of a block leader. Our insights suggest that communities should optimally spread out leaders geographically and select leaders whose dwellings are representative of the community’s existing building stock.

The central puzzle of persuasion is why a receiver would listen to a sender who they know is trying to change their beliefs or behavior. This article summarizes five approaches to solving this puzzle: (1) some messages are easier to send for those with favorable information (costly signaling), (2) the sender and receiver have common interest, (3) the sender messages are verifiable information, (4) the sender cares about their reputation for competence/honesty, and (5) the sender can commit to a messaging strategy (often called ‘Bayesian Persuasion’). After reviewing these approaches with common notation, I discuss which provide insight into prominent empirical findings on campaigns, partisan media, and lobbying. While models focusing on commitment have rapidly become prominent (if not dominant) in the recent theoretical literature on persuasion in political science and economics, the insights they provide are primarily technical, and are not particularly well-suited to explaining most of these phenomena.

We investigate how prior-biased inferences change players' strategic incentives and result in novel welfare implications in the canonical framework of strategic information transmission. The ex ante social welfare achieved in our model exceeds the upper bound characterized in the standard environment without prior bias. The welfare gain stems from the fact that the receiver's prior bias weakens the link between the sender's message and the receiver's response without contaminating the actual content of the messages. We further show that direct communication is optimal among all possible communication protocols in the presence of a sufficient degree of prior bias. © 2023 Elsevier Inc.

A decision maker solicits information from two partially informed experts and then makes a choice under uncertainty. The experts can be either moderately or extremely biased relative to the decision maker, which is their private information. I investigate the incentives of the experts to share their private information with the decision maker and analyze the resulting effects on information transmission. I show that it may be optimal to consult a single expert rather than two experts if the decision maker is sufficiently concerned about taking advice from extremely biased experts. In contrast to what may be expected, this result suggests that getting a second opinion may not always be helpful for decision making.

The dissertation studies several topics about strategic information transmission, in particular, how the outcome is influenced by cognitive capacity and communication cost; and how a decision maker should organize the procedure of requesting advice from multiple experts. In Chapter 1, I analyze how a principal should influence an agent’s incentive in processing information about multiple issues when they have conflict about relative importance. I show that because it is costly for the agent to process information, it is not necessarily beneficial for the principal to provide a higher reward for better quality of information processed (even when rewards do not involve payout from the principal) or to request the agent to process more information. I characterize when the benefit of more attention induced by a higher reward or more information available would be dominated by the cost of attention distortion, and show that the result is not monotonic in the agent’s cost of attention and the relevance between issues. In Chapter 2, we consider a manager’s problem about requesting support from multiple experts to implement one (of many) projects. The game in which the manager consults experts simultaneously typically has multiple equilibria, including one in which the manager’s favorite project is supported by some expert. In the leading case, we show that only one equilibrium outcome survives iterative deletion of weakly dominated strategies which is the experts’ most preferred equilibrium. We identify sequential procedures that perform equally well as this equilibrium from the manager’s perspective. In Chapter 3, we study a voluntary disclosure game in which a firm discloses a signal about the future cash flow subject to proprietary costs or uncertainty about signal endowment, and rationally inattentive investors allocate their attention to disclosures. We find that for low levels of attention, more attention facilitates communication and increases disclosure; for high l

The dissertation studies several topics about strategic information transmission, in particular, how the outcome is influenced by cognitive capacity and communication cost; and how a decision maker should organize the procedure of requesting advice from multiple experts. In Chapter 1, I analyze how a principal should influence an agent’s incentive in processing information about multiple issues when they have conflict about relative importance. I show that because it is costly for the agent to process information, it is not necessarily beneficial for the principal to provide a higher reward for better quality of information processed (even when rewards do not involve payout from the principal) or to request the agent to process more information. I characterize when the benefit of more attention induced by a higher reward or more information available would be dominated by the cost of attention distortion, and show that the result is not monotonic in the agent’s cost of attention and the relevance between issues. In Chapter 2, we consider a manager’s problem about requesting support from multiple experts to implement one (of many) projects. The game in which the manager consults experts simultaneously typically has multiple equilibria, including one in which the manager’s favorite project is supported by some expert. In the leading case, we show that only one equilibrium outcome survives iterative deletion of weakly dominated strategies which is the experts’ most preferred equilibrium. We identify sequential procedures that perform equally well as this equilibrium from the manager’s perspective. In Chapter 3, we study a voluntary disclosure game in which a firm discloses a signal about the future cash flow subject to proprietary costs or uncertainty about signal endowment, and rationally inattentive investors allocate their attention to disclosures. We find that for low levels of attention, more attention facilitates communication and increases disclosure; for high l

We study a cheap talk model in which a decision maker and an expert are both privately informed. Both players observe independent signals that joint ly determine ideal actions for the players. Furt hermore, in our model, the decision maker can send a cheap talk message to the expert, which is followed by the expert's cheap talk and then the decision maker's decision making. We show that the informed decision maker can informatively reveal her private information to the expert but her talk does not affect the quality of the expert's information transmission in models in which optimal actions are only additively or multiplicatively separable in the two players' information, and their preferences are represented by quadratic loss functions. We also apply our finding to a decision maker's information acquisition problem.

We consider a situation in which a decision-maker gathers information from imperfectly informed experts, receiving coarse signals about a uniform state of the world. Private information is (conditionally) correlated across players, and communication is cheap talk. We show that with two experts correlation unambiguously tightens the conditions on preferences for a truth-telling equilibrium. However, with multiple experts the effect of correlation on the incentives to report information truthfully can be non-monotonic: while little and large levels of correlation hinder truth-telling, intermediate levels may discipline experts’ equilibrium behaviour and foster truthful communication. We discuss the implications of our results for the political discussion in the presence of ‘selective exposure’ to media, where similarity in preferences comes with higher correlation, and a trade-off between truth-telling incentives and informational content arises.

This dissertation studies topics related to labor markets and agricultural cooperatives in developing countries. In the first chapter, I study the Employment Tax Incentive (ETI), a South African wage subsidy to firms for newly hired young workers. This chapter provides a unique contribution to the literature on the effects of wage subsidies in developing countries. The ETI is one of only a few nationally implemented wage subsidies. Additionally, South Africa has the highest youth unemployment rate in the world. I use a difference-in-difference strategy based on age-eligibility and the start date of the policy to estimate its effects on youth employment outcomes in the first year of implementation. I find that even though the take-up rate of subsidies by firms was higher than expected, youth employment did not improve. I discuss the potential structural factors responsible for the seeming failure of this policy. In the second chapter, I explore the importance of ethnic capital, a proxy for social capital, in determining labor market outcomes for South Africa’s internal migrants. While the role of social networks for the labor market outcomes of international migrants has been extensively studied, internal migrants have not received the same attention. Arguably, internal migration is an important phenomenon for developing countries. I look at how ethnic capital affects the employment probability and the occupation choice of South African internal migrants. I find that the employment probability of an internal migrant is driven by the education distribution of his ethnic group, even after accounting for local labor market conditions and unobserved ethnic group effects. I also find that occupation choice is related to the education distribution and the gender composition of the ethnic group at the destination. In the third chapter, coauthored with Angelino Viceisza and Tanguy Bernard, we study how communication can be improved to solve coordination issues within agricul

This study examines smallholder farmers' preferences for the uptake of contractual climate-smart agroforestry, which yields economic and ecosystem benefits. A discrete choice experiment was conducted with smallholder farmers in Ethiopia to elicit their willingness to participate in a payment for ecosystem services (PES) scheme that incentivizes integrating faidherbia albida (a fertilizer tree) in their mono-cropping farming system. Attributes evaluated are "number of planted trees", "payment amount", "payment type", and "contract period". The presence of heterogeneity in the choice behavior of farmers warrants the use of the generalized multinomial logit and latent class conditional logit models to allow for farmer-and class-specific preferences, respectively. The results show that farmers derive higher utility from up-front payments. Farmers also strongly prefer food as the mode of payment than cash.

We investigate the credibility of nonbinding preplay statements about cooperative behavior, using data from a high-stakes TV game show in which contestants play a variant on the classic Prisoner’s Dilemma. We depart from the conventional binary approach of classifying statements as promises or not, and propose a more fine-grained two-by-two typology inspired by the idea that lying aversion leads defectors to prefer statements that are malleable to ex-post interpretation as truths. Our empirical analysis shows that statements that carry an element of conditionality or implicitness are associated with a lower likelihood of cooperation, and confirms that malleability is a good criterion for judging the credibility of cheap talk.

Bu inceleme çalışması, stratejik iletişim ve ikna etme üzerine detaylı bir literatür taraması sunmaktadır. Araştırmanın amacı literatürdeki farklı yaklaşımların sistematik bir sınıflandırmasını yaparken, her bir kategoride öne çıkan çalışmaları, belirleyici ve öncü makaleleri tartışmaları ile ortaya koymaktır., This survey paper presents an extended literature review of strategic communication and persuasion. The goal is to provide a systematic categorization of the different approaches in the literature, accompanied with the discussions of the pioneer and leading papers as well as the frontier research in each of the categories.

Bu inceleme çalışması, stratejik iletişim ve ikna etme üzerine detaylı bir literatür taraması sunmaktadır. Araştırmanın amacı literatürdeki farklı yaklaşımların sistematik bir sınıflandırmasını yaparken, her bir kategoride öne çıkan çalışmaları, belirleyici ve öncü makaleleri tartışmaları ile ortaya koymaktır., This survey paper presents an extended literature review of strategic communication and persuasion. The goal is to provide a systematic categorization of the different approaches in the literature, accompanied with the discussions of the pioneer and leading papers as well as the frontier research in each of the categories.

This study examines smallholder farmers' preferences for the uptake of contractual climate-smart agroforestry, which yields economic and ecosystem benefits. A discrete choice experiment was conducted with smallholder farmers in Ethiopia to elicit their willingness to participate in a payment for ecosystem services (PES) scheme that incentivizes integrating faidherbia albida (a fertilizer tree) in their mono-cropping farming system. Attributes evaluated are "number of planted trees", "payment amount", "payment type", and "contract period". The presence of heterogeneity in the choice behavior of farmers warrants the use of the generalized multinomial logit and latent class conditional logit models to allow for farmer-and class-specific preferences, respectively. The results show that farmers derive higher utility from up-front payments. Farmers also strongly prefer food as the mode of payment than cash.

We investigate the credibility of nonbinding preplay statements about cooperative behavior, using data from a high-stakes TV game show in which contestants play a variant on the classic Prisoner’s Dilemma. We depart from the conventional binary approach of classifying statements as promises or not, and propose a more fine-grained two-by-two typology inspired by the idea that lying aversion leads defectors to prefer statements that are malleable to ex-post interpretation as truths. Our empirical analysis shows that statements that carry an element of conditionality or implicitness are associated with a lower likelihood of cooperation, and confirms that malleability is a good criterion for judging the credibility of cheap talk.

June 2017. Revised June 2018. Secondary Revised January 2019., We analyze a cheap talk model in which an informed sender and an uninformed receiver engage in finite-period communication before the receiver chooses a project. During the communication phase, in each period, the sender sends a cheap talk message and the receiver voluntarily pays money for the message she receives. Our results show that combining multistage information transmission with the receiver’s voluntary payments can improve welfare. Moreover, we find an upper bound of the receiver’s equilibrium payoff and provide a sufficient condition for it to be approximated by the receiver’s equilibrium payoff. This result shows that multistage information transmission with voluntary monetary transfer can be more beneficial for the receiver than a wide class of other communication protocols (e.g., mediation and arbitration).

June 2017. Revised June 2018. Secondary Revised January 2019., We analyze a cheap talk model in which an informed sender and an uninformed receiver engage in finite-period communication before the receiver chooses a project. During the communication phase, in each period, the sender sends a cheap talk message and the receiver voluntarily pays money for the message she receives. Our results show that combining multistage information transmission with the receiver’s voluntary payments can improve welfare. Moreover, we find an upper bound of the receiver’s equilibrium payoff and provide a sufficient condition for it to be approximated by the receiver’s equilibrium payoff. This result shows that multistage information transmission with voluntary monetary transfer can be more beneficial for the receiver than a wide class of other communication protocols (e.g., mediation and arbitration).

This paper experimentally studies unilateral communication of intentions in eight different two-player one-shot normal form games with complete information. We find that communication is used both to coordinate and to deceive, and that messages have a significant impact on beliefs and behavior even in dominance solvable games. Nash equilibrium and cognitive hierarchy jointly account for many regularities, but not all of the evidence. Sophisticated sender behavior is especially difficult to reconcile with existing models.

We explore costly deliberation by two differentially informed and possibly biased jurors: A hawk Lones and a dove Moritz alternately insist on a verdict until one concedes. Debate assumes one of two genres, depending on bias: A juror, say Lones, is intransigent if he wishes to prevail and reach a conviction for any type of Moritz next to concede. In contrast, Lones is ambivalent if he wants the strongest conceding types of Moritz to push for acquittal. Both jurors are ambivalent with small bias or high delay costs. As Lones grows more hawkish, he argues more forcefully for convictions, mitigating wrongful acquittals. If dovish Moritz is intransigent, then he softens (strategic substitutes), leading to more wrongful convictions. Ambivalent debate is new, and yields a novel dynamic benefit of increased polarization. For if Moritz is ambivalent, then he toughens (strategic complements), and so, surprisingly, a more hawkish Lones leads to fewer wrongful acquittals and convictions. So more polarized but balanced debate can improve communication, unlike in static cheap talk. We also show that patient and not too biased jurors vote against their posteriors near the end of the debate, optimally playing devil’s advocate. We shed light on the adversarial legal system, peremptory challenges, and cloture rules.

We study Sender-optimal signaling equilibria with cheap talk and money-burning. Under general assumptions, the Sender never uses money-burning to reveal all states, but always wants to garble information for at least some states. With quadratic preferences and any log-concave density of the states, optimal communication is garbled for all states: money-burning, if used at all, is used to adjust pooling intervals. This is illustrated by studying in depth the well-known uniform-quadratic case. We also show how the presence of a cost of being “caught unprepared” that gives rise to a small change in a common assumption on the Receiver’s utility function makes full revelation through money-burning Sender-optimal.

This paper reports on experiments testing the viability of markets for cheap talk information. We find that these markets are fragile. The reasons are surprising given the previous experimental results on cheap-talk games. Our subjects provide low-quality information even when doing so does not increase their monetary payoff. We show that this is not because subjects play a different (babbling) equilibrium. By analyzing subjects’ behavior in another game, we find that those adopting deceptive strategies tend to have envious or non-pro-social traits. The poor quality of the information transmitted leads to a collapse of information markets.

This paper reports on experiments testing the viability of markets for cheap talk information. We find that these markets are fragile. The reasons are surprising given the previous experimental results on cheap-talk games. Our subjects provide low-quality information even when doing so does not increase their monetary payoff. We show that this is not because subjects play a different (babbling) equilibrium. By analyzing subjects’ behavior in another game, we find that those adopting deceptive strategies tend to have envious or non-pro-social traits. The poor quality of the information transmitted leads to a collapse of information markets.

This paper reports on experiments testing the viability of markets for cheap talk information. We find that these markets are fragile. The reasons are surprising given the previous experimental results on cheap-talk games. Our subjects provide low-quality information even when doing so does not increase their monetary payoff. We show that this is not because subjects play a different (babbling) equilibrium. By analyzing subjects’ behavior in another game, we find that those adopting deceptive strategies tend to have envious or non-pro-social traits. The poor quality of the information transmitted leads to a collapse of information markets.

We implement a repeated version of the Barro-Gordon monetary policy game in the laboratory and ask whether reputation serves as a substitute for commitment, enabling the central bank to achieve the efficient Ramsey equilibrium and avoid the inefficient, time-inconsistent one-shot Nash equilibrium. We find that reputation is a poor substitute for commitment. We then explore whether central bank cheap talk, policy transparency, both cheap talk and policy transparency or economic transparency yield improvements in the direction of the Ramsey equilibrium under the discretionary policy regime. Our findings suggest that these mechanisms have only small or transitory effects on welfare. Surprisingly, the real effects of supply shocks are better mitigated by a commitment regime than by any discretionary policy. Thus, we find that there is no trade-off between flexibility and credibility.

We implement a repeated version of the Barro-Gordon monetary policy game in the laboratory and ask whether reputation serves as a substitute for commitment, enabling the central bank to achieve the efficient Ramsey equilibrium and avoid the inefficient, time-inconsistent one-shot Nash equilibrium. We find that reputation is a poor substitute for commitment. We then explore whether central bank cheap talk, policy transparency, both cheap talk and policy transparency or economic transparency yield improvements in the direction of the Ramsey equilibrium under the discretionary policy regime. Our findings suggest that these mechanisms have only small or transitory effects on welfare. Surprisingly, the real effects of supply shocks are better mitigated by a commitment regime than by any discretionary policy. Thus, we find that there is no trade-off between flexibility and credibility.

Prior research indicates that trust and cooperation amongst unfamiliar collaborators in remote locations is crucial to Global Software Engineering (GSE) practices. Furthermore, trust and cooperation development requires proper social or technical mediations. Our prior empirical research demonstrates that informal, non-work-related conversation (a.k.a, "cheap talk") over the internet correlates with higher trust and better cooperation. This empirical observation inspired us to hypothesize that cheap talk may also bring about better trust and cooperation. We conducted three related studies to investigate how cheap talk influenced the emergence and diffusion of trust and cooperation in GSE teams. Using game theory, we performed theoretical analyses and agent-based modeling and simulation in which we abstracted GSE collaboration to a variation of the classic stag hunt game. We empirically studied the project communication records of Apache Lucene and Google Chromium OS to validate our approach and to provide a context for our three studies.The results of the three studies revealed the following. First, all three studies revealed that cheap talk over the internet positively influences trust and cooperation development among GSE practitioners. Second, cheap talk over the internet often functioned as "catalyst" and might disappear once trust and cooperation become a team norm. Third, proper seeding strategies would improve the effectiveness and efficiency of trust and cooperation development when considering the social network's effect. Last, but not least, individuals' baseline trust significantly impacted the dynamics of trust and cooperation development. Our results and findings have important implications for theory development, GSE practices, and research methodology. Theoretically, we developed descriptions and explanations. Practically, the results and findings led to implications for collaboration management, and potential data-driven tools that support game theory

We examine centralized versus decentralized decision making when experience of agents is private information and communication is necessary to learn from others. An agent has reputational concerns and his market may or may not observe what the other agent chooses (global versus local markets). With decentralized decision making, agents' willingness to communicate depends heavily on what a market observes. Strikingly, less communication may improve welfare. If markets are global, centralization outperforms decentralization as it makes communication possible, and communication is informative for any finite degree of conflict among agents and with the center.

This paper develops a semiotic-inferential model of verbal communication for incomplete information games: a language is seen as a set of conventional signs that point to types, and the credibility of a message depends on the strategic context. Formally, there is an encoding-decoding step where the receiver can understand the sender's message if and only if a common language is used, and an inferential step where the receiver may either trust the message's literal meaning or disregard it when updating priors. The epistemic requirement that information be transmitted through the literal meaning of the message uttered leads to an equilibrium concept distinct from a Perfect Bayesian Equilibrium, ruling out informative equilibria where language is not used in its ordinary sense. The paper also proposes a refinement by which the sender selects among equilibria if all sender types are willing to play the same equilibrium.

Prior research indicates that trust and cooperation amongst unfamiliar collaborators in remote locations is crucial to Global Software Engineering (GSE) practices. Furthermore, trust and cooperation development requires proper social or technical mediations. Our prior empirical research demonstrates that informal, non-work-related conversation (a.k.a, "cheap talk") over the internet correlates with higher trust and better cooperation. This empirical observation inspired us to hypothesize that cheap talk may also bring about better trust and cooperation. We conducted three related studies to investigate how cheap talk influenced the emergence and diffusion of trust and cooperation in GSE teams. Using game theory, we performed theoretical analyses and agent-based modeling and simulation in which we abstracted GSE collaboration to a variation of the classic stag hunt game. We empirically studied the project communication records of Apache Lucene and Google Chromium OS to validate our approach and to provide a context for our three studies.The results of the three studies revealed the following. First, all three studies revealed that cheap talk over the internet positively influences trust and cooperation development among GSE practitioners. Second, cheap talk over the internet often functioned as "catalyst" and might disappear once trust and cooperation become a team norm. Third, proper seeding strategies would improve the effectiveness and efficiency of trust and cooperation development when considering the social network's effect. Last, but not least, individuals' baseline trust significantly impacted the dynamics of trust and cooperation development. Our results and findings have important implications for theory development, GSE practices, and research methodology. Theoretically, we developed descriptions and explanations. Practically, the results and findings led to implications for collaboration management, and potential data-driven tools that support game theory

ISER discussion paper, June 2009. Revised June 2015, This paper considers a model of strategic information transmission with an imperfectly informed receiver and provides a simple logic by which the receiver’s prior knowledge becomes an impediment to efficient communication. We show that the extent of communication is severely limited as the receiver becomes more informed. Moreover, in a simple example with two signals, we show that no information can be conveyed via cheap talk for an arbitrarily small degree of preference incongruence. This result draws sharp contrast to the case with an uninformed receiver which always yields a fully separating equilibrium as long as the preferences are sufficiently congruent.

ISER discussion paper, June 2009. Revised June 2015, This paper considers a model of strategic information transmission with an imperfectly informed receiver and provides a simple logic by which the receiver’s prior knowledge becomes an impediment to efficient communication. We show that the extent of communication is severely limited as the receiver becomes more informed. Moreover, in a simple example with two signals, we show that no information can be conveyed via cheap talk for an arbitrarily small degree of preference incongruence. This result draws sharp contrast to the case with an uninformed receiver which always yields a fully separating equilibrium as long as the preferences are sufficiently congruent.

In this paper we study market environments where information is costly to acquire and is also useful to potential competitors. Agents may sell, or buy, reports over the information acquired and choose their trades in the market on the basis of what they learnt. Reports are unverifiable - cheap talk messages - hence the quality of the information transmitted depends on the conflicts of interest faced by the senders. We find that, when information has a prevalent horizontal differentiation component, in equilibrium information is acquired when its costs are not too high and in that case it is also sold, though reports are typically noisy. The market for information is in most cases a monopoly, and there is underinvestment in information acquisition. We also show that regulatory interventions, in the form of firewalls, only make the inefficiency worse. Efficiency can be attained with a monopolist selling differentiated information, provided entry is blocked.

In this paper we study market environments where information is costly to acquire and is also useful to potential competitors. Agents may sell, or buy, reports over the information acquired and choose their trades in the market on the basis of what they learnt. Reports are unverifiable - cheap talk messages - hence the quality of the information transmitted depends on the conflicts of interest faced by the senders. We find that, when information has a prevalent horizontal differentiation component, in equilibrium information is acquired when its costs are not too high and in that case it is also sold, though reports are typically noisy. The market for information is in most cases a monopoly, and there is underinvestment in information acquisition. We also show that regulatory interventions, in the form of firewalls, only make the inefficiency worse. Efficiency can be attained with a monopolist selling differentiated information, provided entry is blocked.

This paper develops a model of bargaining over decision rights between an uninformed principal and an informed but self-interested agent. We introduce two different bargaining mechanisms: tacit and explicit bargaining. In tacit bargaining, an uninformed principal makes a take-it-or-leave-it price offer to the agent, who then decides whether to accept or reject the offer. In the equilibrium of the game, the principal inefficiently screens out some agent types so that the agent's private information cannot be fully utilized when the decision is made. In explicit bargaining in which parties can communicate explicitly via cheap talk before tacit bargaining, however, an equilibrium with no such inefficient screening exists even when the conflict of interest is arbitrarily large. We also follow a mechanism design approach, showing that under certain conditions, explicit bargaining is an optimal bargaining mechanism that maximizes the joint surplus of the parties. (C) 2014 Elsevier Inc. All rights reserved.

In this paper we study market environments where information is costly to acquire and is also useful to potential competitors. Agents may sell, or buy, reports over the information acquired and choose their trades in the market on the basis of what they learnt. Reports are unverifiable - cheap talk messages - hence the quality of the information transmitted depends on the conflicts of interest faced by the senders. We find that, when information has a prevalent horizontal differentiation component, in equilibrium information is acquired when its costs are not too high and in that case it is also sold, though reports are typically noisy. The market for information is in most cases a monopoly, and there is underinvestment in information acquisition. We also show that regulatory interventions, in the form of firewalls, only make the inefficiency worse. Efficiency can be attained with a monopolist selling differentiated information, provided entry is blocked.

This paper develops a model of bargaining over decision rights between an uninformed principal and an informed but self-interested agent. We introduce two different bargaining mechanisms: tacit and explicit bargaining. In tacit bargaining, an uninformed principal makes a take-it-or-leave-it price offer to the agent, who then decides whether to accept or reject the offer. In the equilibrium of the game, the principal inefficiently screens out some agent types so that the agent's private information cannot be fully utilized when the decision is made. In explicit bargaining in which parties can communicate explicitly via cheap talk before tacit bargaining, however, an equilibrium with no such inefficient screening exists even when the conflict of interest is arbitrarily large. We also follow a mechanism design approach, showing that under certain conditions, explicit bargaining is an optimal bargaining mechanism that maximizes the joint surplus of the parties. (C) 2014 Elsevier Inc. All rights reserved.

The paper analyzes the role of the structure of communication - i.e. who is talking with whom - on the choice of messages, on their credibility and on actual play. We run an experiment in a three-player coordination game with Pareto ranked equilibria, where a pair of agents has a profitable joint deviation from the Pareto-dominant equilibrium. According to our analysis of credibility, the subjects should communicate and play the Pareto optimal equilibrium only when communication is public. When pairs of agents exchange messages privately, the players should play the Pareto dominated equilibrium and disregard communication. The experimental data conform to our predictions: the agents reach the Pareto-dominant equilibrium only when announcing to play it is credible. When private communication is allowed, lying is prevalent, and players converge to the Pareto-dominated equilibrium. Nevertheless, at the individual level, players’ beliefs and choices tend to react to messages even when these are non-credible.

The paper analyzes the role of the structure of communication - i.e. who is talking with whom - on the choice of messages, on their credibility and on actual play. We run an experiment in a three-player coordination game with Pareto ranked equilibria, where a pair of agents has a profitable joint deviation from the Pareto-dominant equilibrium. According to our analysis of credibility, the subjects should communicate and play the Pareto optimal equilibrium only when communication is public. When pairs of agents exchange messages privately, the players should play the Pareto dominated equilibrium and disregard communication. The experimental data conform to our predictions: the agents reach the Pareto-dominant equilibrium only when announcing to play it is credible. When private communication is allowed, lying is prevalent, and players converge to the Pareto-dominated equilibrium. Nevertheless, at the individual level, players’ beliefs and choices tend to react to messages even when these are non-credible.

Cheap talk (CT) scripts have been broadly tested in contingent valuation studies to mitigate the effects of hypothetical bias. However, this approach may not fully be adequate when the individual is faced with several choices such as in discrete choice experiments (DCE) because the respondent may tend to forget about the CT script. This paper tests the effects of a single opt-out reminder (SOOR) to lower the hypothetical bias in a DCE dealing with the valuation of social preferences for forest fire prevention programs in Southern Spain. Results show that the inclusion of a SOOR does not contribute sufficiently to improve the CT effect on the DCE data. © 2014 Department of Forest Economics, Swedish University of Agricultural Sciences, Umeå.

This paper develops a model of bargaining over decision rights between an uninformed principal and an informed but self-interested agent. We introduce two different bargaining mechanisms: tacit and explicit bargaining. In tacit bargaining, an uninformed principal makes a take-it-or-leave-it price offer to the agent, who then decides whether to accept or reject the offer. In the equilibrium of the game, the principal inefficiently screens out some agent types so that the agent's private information cannot be fully utilized when the decision is made. In explicit bargaining in which parties can communicate explicitly via cheap talk before tacit bargaining, however, an equilibrium with no such inefficient screening exists even when the conflict of interest is arbitrarily large. We also follow a mechanism design approach, showing that under certain conditions, explicit bargaining is an optimal bargaining mechanism that maximizes the joint surplus of the parties. (C) 2014 Elsevier Inc. All rights reserved.

Hypothetical bias continues to be a major challenge for stated preference methods. Cheap Talk (CT) has been found to be an effective remedy in some applications, though empirical results are ambiguous. We discuss reasons why CT may fail to effectively remove specific types of hypothetical bias in Choice Experiments. We suggest augmenting CT in Choice Experiments with a so-called Opt-Out Reminder (OOR). Prior to each choice set, the OOR explicitly instructs respondents to choose the opt-out alternative, if they find the experimentally designed alternatives too expensive. In an empirical survey we find the OOR to significantly reduce total WTP and to some extent also marginal WTP beyond the capability of the CT applied without the OOR. This suggests that the CT practice should be adapted to fit the potentially different decision processes and repeated choices structure of the Choice Experiment format, rather than merely being adopted directly from Contingent Valuation., Hypothetical bias continues to be a major challenge for stated preference methods. Cheap Talk (CT) has been found to be an effective remedy in some applications, though empirical results are ambiguous. We discuss reasons why CT may fail to effectively remove specific types of hypothetical bias in Choice Experiments. We suggest augmenting CT in Choice Experiments with a so-called Opt-Out Reminder (OOR). Prior to each choice set, the OOR explicitly instructs respondents to choose the opt-out alternative, if they find the experimentally designed alternatives too expensive. In an empirical survey we find the OOR to significantly reduce total WTP and to some extent also marginal WTP beyond the capability of the CT applied without the OOR. This suggests that the CT practice should be adapted to fit the potentially different decision processes and repeated choices structure of the Choice Experiment format, rather than merely being adopted directly from Contingent Valuation.

The paper analyzes the role of the structure of communication - i.e. who is talking with whom - on the choice of messages, on their credibility and on actual play. We run an experiment in a three-player coordination game with Pareto ranked equilibria, where a pair of agents has a profitable joint deviation from the Pareto-dominant equilibrium. According to our analysis of credibility, the subjects should communicate and play the Pareto optimal equilibrium only when communication is public. When pairs of agents exchange messages privately, the players should play the Pareto dominated equilibrium and disregard communication. The experimental data conform to our predictions: the agents reach the Pareto-dominant equilibrium only when announcing to play it is credible. When private communication is allowed, lying is prevalent, and players converge to the Pareto-dominated equilibrium. Nevertheless, at the individual level, players’ beliefs and choices tend to react to messages even when these are non-credible.

Hypothetical bias continues to be a major challenge for stated preference methods. Cheap Talk (CT) has been found to be an effective remedy in some applications, though empirical results are ambiguous. We discuss reasons why CT may fail to effectively remove specific types of hypothetical bias in Choice Experiments. We suggest augmenting CT in Choice Experiments with a so-called Opt-Out Reminder (OOR). Prior to each choice set, the OOR explicitly instructs respondents to choose the opt-out alternative, if they find the experimentally designed alternatives too expensive. In an empirical survey we find the OOR to significantly reduce total WTP and to some extent also marginal WTP beyond the capability of the CT applied without the OOR. This suggests that the CT practice should be adapted to fit the potentially different decision processes and repeated choices structure of the Choice Experiment format, rather than merely being adopted directly from Contingent Valuation., Hypothetical bias continues to be a major challenge for stated preference methods. Cheap Talk (CT) has been found to be an effective remedy in some applications, though empirical results are ambiguous. We discuss reasons why CT may fail to effectively remove specific types of hypothetical bias in Choice Experiments. We suggest augmenting CT in Choice Experiments with a so-called Opt-Out Reminder (OOR). Prior to each choice set, the OOR explicitly instructs respondents to choose the opt-out alternative, if they find the experimentally designed alternatives too expensive. In an empirical survey we find the OOR to significantly reduce total WTP and to some extent also marginal WTP beyond the capability of the CT applied without the OOR. This suggests that the CT practice should be adapted to fit the potentially different decision processes and repeated choices structure of the Choice Experiment format, rather than merely being adopted directly from Contingent Valuation.

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.

We analyze the reporting strategies of firms and the investigation strategies of auditors in an archetype principles-based financial reporting system. To this end, we add a verification stage to a standard cheap-talk game, and apply the resulting game to financial reporting. We show that for a principles-based system to work properly, firms should bear a sufficient share of the cost of a thorough investigation. Furthermore, we find that a principles-based system is a mixed blessing. On the one hand, it leads to a plausible investigation strategy of the auditor, in which "suspected" reports receive most attention. On the other hand, a principles-based system only indirectly weakens firms' incentives to report aggressively.

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.

We consider a game of information transmission, with one informed decision maker gathering information from one or more informed senders. Private information is (conditionally) correlated across players, and communication is cheap talk. For the one sender case, we show that correlation unambiguously tightens the existence conditions for a truth-telling equilibrium. We then generalize the model to an arbitrary number of senders, and we find that, in this case, the effect of correlation on the incentives to report information truthfully is non monotone, and correlation may discipline senders' equilibrium behavior, making it easier to sustain truth-telling.

We consider a job contest in which candidates go through interviews (cheap talk) and are subject to reference checks. We show how competitive pressure - increasing the ratio of "good" to "bad" type candi- dates - can lead to a vast increase in lying and in some cases make bad hires more likely. As the number of candidates increases, it becomes harder to in- duce truth-telling. The interview stage becomes redundant if the candidates, a priori, know each others' type or the result of their own reference check. Finally, we show that the employer can bene t from committing not to reject all the applicants.