Communication In Global Games: Theory and Experiment


Abstract | Paper

This paper introduces communication as a strategic choice in global games. To study the effects of communication, I consider four protocols (three one-round and one multi-round) and I characterize the resulting equilibria. The theory provides clear predictions, which are then tested in an experimental setting. Theoretically, all of the communication protocols studied in this paper equally improve welfare above that attainable without communication. This welfare improvement is achieved by reducing miscoordination and by allowing agents to select the payoff dominant as opposed to the risk-dominant equilibrium. The experimental results demonstrate that the multi-round protocol provides significantly higher welfare, while one-round communication has mixed effect.

A Road to Efficiency Through Communication and Commitment

(with João Ramos)

Abstract | Paper

We examine the efficiency gains of introducing a pre-play phase—allowing agents to communicate their intentions and commit to them—in a game with Pareto ranked equilibria. We focus on a game in which a Pareto inferior equilibrium is usually chosen. We first derive the theoretical conditions under which the efficient equilibrium is unique in the extended game and then we test our theory in the lab. The introduction of the pre-play revision phase increases the coordination on the Pareto dominant equilibrium, restoring over 50% of the efficiency lost in the standard setting. The results shed new light on cheap talk and reveal that a combination of communication and commitment leads to significantly higher welfare.

Attention In Games: An Experimental Study

(with Andrew Schotter)

Abstract | Paper

A common assumption in game theory is that players concentrate on one game at a time. However, in everyday life, we play many games and make many decisions at the same time, and, thus, we have to decide how best to divide our limited attention across these settings. In this paper we ask how players solve this attention-allocation problem and how their decision affects the way players behave in any given game when that game is viewed in isolation. We find that the attention of players is attracted to particular features of the games they play: the maximum payoff in the game, the minimum payoff, the degree of inequality in the game’s payoff, whether the game has zero payoffs, the complexity of the game, and the type of game being played. Moreover, how much attention a subject gives to a particular game depends on the other game that he or she is simultaneously attending to.

Paying For Inattention

(with Giorgia Romagnoli)

Abstract | Slides

We extend the model of costly information acquisition to the case where a decision maker is able to affect his own incentives to pay attention via an ex-ante redistribution of payoffs across states. We use this framework to derive a novel method to elicit the level and the cost of attention solely from observing the choices of payoff redistribution. While existing work in this literature typically involves enriched datasets (e.g., mouse and eye tracking, response times, stochastic choice data etc.) our method requires only standard choice data. We run an experiment and estimate the level and the cost of attention using our elicitation technique.

Linking Truth-telling and Fairness: An Experimental Study

(with Nikhil Vellodi)

Abstract

We study the interaction of two well-known behavioral norms – truth-telling and fairness. Experimental findings collectively suggest how in isolation, each of these phenomena emerge in spite of what rational models of homo economicus might predict. But how do they complement each other? To address this question, we construct a simple modification of the ultimatum game in which the responder has private valuations over the surplus to be shared and can communicate these to the proposer via cheap-talk messages. We take this game to the lab. When provided with minimal yet explicit incentives to lie, we find that play involves not only greater incidence of lying, but also convergence to self-interested play. That is, the outcomes of the ultimatum sub-game largely revert to its unique sub-game perfect equilibrium. Our results speak to a linkage effect between social norms.

On the Consistency of Attention and Response Times

(with Andrew Schotter and Elizabeth Schotter )

Attention Allocation in One Person Decision Problems

(with Andrew Schotter and Elizabeth Schotter )