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Cheap Talk with Multiple Strategically Interacting Audiences: An Experimental Study

We consider a cheap-talk setting that mimics the situation where an incumbent firm (the sender) is endowed with incentives to understate the true size of the market demand to two potential entrants (the receivers). Although our experimental data reveals that the senders’ messages convey truthful inf...

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Detalles Bibliográficos
Autores principales: Li, Xinyu, Peeters, Ronald
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2016
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5047534/
https://www.ncbi.nlm.nih.gov/pubmed/27695082
http://dx.doi.org/10.1371/journal.pone.0163783
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author Li, Xinyu
Peeters, Ronald
author_facet Li, Xinyu
Peeters, Ronald
author_sort Li, Xinyu
collection PubMed
description We consider a cheap-talk setting that mimics the situation where an incumbent firm (the sender) is endowed with incentives to understate the true size of the market demand to two potential entrants (the receivers). Although our experimental data reveals that the senders’ messages convey truthful information and this is picked up by the receivers, this overcommunication (relative to standard theoretical prediction) does not enhance efficient entry levels (and payoffs) to beyond what can be achieved without communication. The reason is that receivers fail to optimally translate the information received in their entry decision, possibly due to overcautiousness.
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spelling pubmed-50475342016-10-27 Cheap Talk with Multiple Strategically Interacting Audiences: An Experimental Study Li, Xinyu Peeters, Ronald PLoS One Research Article We consider a cheap-talk setting that mimics the situation where an incumbent firm (the sender) is endowed with incentives to understate the true size of the market demand to two potential entrants (the receivers). Although our experimental data reveals that the senders’ messages convey truthful information and this is picked up by the receivers, this overcommunication (relative to standard theoretical prediction) does not enhance efficient entry levels (and payoffs) to beyond what can be achieved without communication. The reason is that receivers fail to optimally translate the information received in their entry decision, possibly due to overcautiousness. Public Library of Science 2016-10-03 /pmc/articles/PMC5047534/ /pubmed/27695082 http://dx.doi.org/10.1371/journal.pone.0163783 Text en © 2016 Li, Peeters http://creativecommons.org/licenses/by/4.0/ This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
spellingShingle Research Article
Li, Xinyu
Peeters, Ronald
Cheap Talk with Multiple Strategically Interacting Audiences: An Experimental Study
title Cheap Talk with Multiple Strategically Interacting Audiences: An Experimental Study
title_full Cheap Talk with Multiple Strategically Interacting Audiences: An Experimental Study
title_fullStr Cheap Talk with Multiple Strategically Interacting Audiences: An Experimental Study
title_full_unstemmed Cheap Talk with Multiple Strategically Interacting Audiences: An Experimental Study
title_short Cheap Talk with Multiple Strategically Interacting Audiences: An Experimental Study
title_sort cheap talk with multiple strategically interacting audiences: an experimental study
topic Research Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5047534/
https://www.ncbi.nlm.nih.gov/pubmed/27695082
http://dx.doi.org/10.1371/journal.pone.0163783
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