Dec. 7th, Quazi Shahriar, Ph.D.When Does Cheap-Talk (Fail to) Increase Efficient Coordination?

Abstract: Can cheap-talk always help achieve maximum efficiency in situations that require coordination? Utilizing a class of two-person two-action coordination games, we show experimentally that cheap-talk may or may not be informative, rending it helpful for or detrimental to efficiency (relative to no cheap-talk condition) and that the nature of coordination outcome crucially hinges upon two key equilibrium-selection criteria: Payoff- and Risk-dominance. To explain our data, we develop a level-k model of thinking in which players tremble while choosing their actions and incur lying costs. Econometric estimations confirm the superior explanatory power of our model over Ellingsen and Östling (2010) model.

Bio: Quazi Shahriar is an assistant professor of economics at San Diego State University. He obtained his PhD from the University of Arizona (2007). His research interests include game theory, experimental economics and behavioral economics. Using experimental data, Dr. Shahriar is interested in studying standard and behavioral aspects in player choices in different games – such as the roles of label salience and deception in coordination games.

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