Lavish Returns on Cheap Talk: Non-Binding Communication in a Trust Experiment

49 Pages Posted: 18 Sep 2007

See all articles by Avner Ben-Ner

Avner Ben-Ner

University of Minnesota - Twin Cities - Carlson School of Management

Louis Putterman

Brown University - Department of Economics

Ting Ren

University of Minnesota - Twin Cities

Date Written: September 10, 2007

Abstract

We let subjects interact with anonymous partners in trust (investment) games with and without one of two kinds of pre-play communication: numerical (tabular) only, and verbal and numerical. We find that either kind of pre-play communication increases trusting, trustworthiness, or both, in inter-subject comparisons, but that the inclusion of verbal communication generates both a larger effect and one that is robust across both inter-subject and intra-subject comparisons. In all conditions, trustors earn more when they invest more of their endowment, trustors and trustees gravitate to "fair and efficient" interactions, and the majority of trustees adhere to their commitments, whether explicit or implicit. Finally, we study trusting and trustworthiness in the sense of adhering to agreements, and we find that both are enhanced when the parties can use words, and especially when an agreement is reached with words and not only with the exchange of numerical proposals.

Keywords: trust game, trust, trustworthiness, reciprocity, commitment, communication, cheap talk.

JEL Classification: C72, C91, D63

Suggested Citation

Ben-Ner, Avner and Putterman, Louis G. and Ren, Ting, Lavish Returns on Cheap Talk: Non-Binding Communication in a Trust Experiment (September 10, 2007). Available at SSRN: https://ssrn.com/abstract=1013582 or http://dx.doi.org/10.2139/ssrn.1013582

Avner Ben-Ner (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Louis G. Putterman

Brown University - Department of Economics ( email )

Box B
Providence, RI 02912
United States
401-863-3837 (Phone)
401-863-1970 (Fax)

Ting Ren

University of Minnesota - Twin Cities ( email )

420 Delaware St. SE
Minneapolis, MN 55455
United States

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