Asymmetric and Endogenous Communication in Competition between Groups

39 Pages Posted: 28 Jan 2015

See all articles by Timothy N. Cason

Timothy N. Cason

Purdue University - Krannert School of Management

Roman M. Sheremeta

Case Western Reserve University

Jingjing Zhang

University of Zurich - Department of Economics

Date Written: January 27, 2015

Abstract

Costless pre-play communication has been shown to effectively facilitate within-group coordination. However, in competitive coordination games, such as rent-seeking contests, better within-group coordination leads to more aggressive competition and lower efficiency. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. We find that allowing within-group communication makes groups compete more aggressively. When only one group can communicate, the communicating group coordinates better and expends higher efforts than the non-communicating group. However, the communicating group earns payoffs that are not different from the baseline contest without any communication, while the non-communicating group earns lower payoffs than in this baseline contest. Allowing within-group communication in both groups leads to even more aggressive competition and the lowest payoffs to both groups. Despite such a “harmful” effect of communication, groups vote to endogenously open communication channels even though this leads to lower payoffs and efficiency.

Keywords: between-group competition, within-group competition, communication, coordination, contests, experiments

JEL Classification: C70, D72, H41

Suggested Citation

Cason, Timothy N. and Sheremeta, Roman M. and Zhang, Jingjing, Asymmetric and Endogenous Communication in Competition between Groups (January 27, 2015). Available at SSRN: https://ssrn.com/abstract=2556536 or http://dx.doi.org/10.2139/ssrn.2556536

Timothy N. Cason

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-1737 (Phone)

Roman M. Sheremeta (Contact Author)

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

Jingjing Zhang

University of Zurich - Department of Economics ( email )

Blümlisalpstrasse 10
Zurich, 8006
Switzerland

HOME PAGE: http://www.econ.uzh.ch/faculty/zhang.html

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