Essays in strategic information transmission

This thesis contributes to the literature on strategic information transmission through providing new insights into strategic behavior under several communication frameworks. The thesis is comprised of five chapters. Chapter 1 provides an overview of the main topics and research methodologies presented in the next three chapters. Chapter 2 reports experiments in sender-receiver games with partially verifiable messages. We explore the role of verification control on strategic behavior and final outcomes. We find that behavior is closer to theoretical predictions when senders have verification control. However, the setting in which receivers have control over the verification action promotes higher average payoffs despite behavior being noisier. Chapter 3 investigates the effect of cheap talk on the interpretation of partially informative verifiable communication (evidence). Using experimental data from sender-receiver games similar to those in chapter 2 we find that cheap talk distorts receivers’ appraisal of evidence. Specifically, it makes receivers depart from theoretical predictions more than they do in a treatment where cheap talk is not present. Chapter 4 explores the effect of cheap talk in a sender-receiver game with sender state independent preferences and a state space with non-uniform distribution. This type of state space leads to the interests of the players to be either more likely aligned, or more likely conflicting. Using a simple theoretical analysis we show that if receivers dislike taking an action that is profitable for a deceiving sender (“sucker aversion”), communication can harm when interests are more likely aligned. However, when interests are more likely conflicting, communication helps due to senders’ “lying aversion”. We run experiments to test these predictions and find no effect of cheap talk when interests are more likely aligned. When interests are more likely conflicting, communication has a positive effect on payoffs but not due to the hypothesized mechanism. Chapter 5 provides a summary of the previous chapters’ results as well as a discussion which points out the limitations. Finally it delineates welcomed directions for future research