Ill-Defined Versus Precise Pre-Play Communication in the Traveler's Dilemma
Posted: 30 Jul 2008
Date Written: July 17, 2008
Basu (1994) argues that claims above the Nash equilibrium in the Traveler's Dilemma may be an equilibrium in a model where rational players use reasoning in ill-defined categories. In this model, players may form beliefs over ill-defined strategies such as "choosing a high claim" and best respond to these beliefs with high claims. We investigate this argument in a laboratory experiment with pre-play communication. We find that pre-play communication in ill-defined categories does not help raise claims. Surprisingly, claims are highest when players can communicate using precise numerical messages even though, theoretically, such communication fails to be self-enforcing in this environment.
Keywords: Traveler's Dilemma, Cheap talk, Language of communication
JEL Classification: C72, C92
Suggested Citation: Suggested Citation