Looking into Crystal Balls: A Laboratory Experiment on Reputational Cheap Talk

70 Pages Posted: 15 Oct 2018 Last revised: 2 Dec 2019

See all articles by Debrah Meloso

Debrah Meloso

Toulouse Business School - TBS Education

Salvatore Nunnari

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Marco Ottaviani

Bocconi University - Department of Economics

Date Written: October 2018

Abstract

We experimentally study cheap talk by reporters motivated by their reputation for being well informed. Evaluators assess reputation by cross checking the report with the realized state of the world. We manipulate the key drivers of misreporting incentives: the uncertainty about the state of the world and the beliefs of evaluators about the strategy of reporters. Consistent with theory, reporters are more likely to report truthfully when there is more uncertainty and when evaluators conjecture that reporters always report truthfully. However, the experiment highlights two phenomena not predicted by standard theory. First, a large fraction of reports is truthful, even when this is not a best response. Second, evaluators have di culty learning reporters' strategies and overreact to message accuracy. We show that a learning model where accuracy is erroneously taken to represent truthfulness ts well evaluators' behavior. This judgement bias reduces reporters' incentives to misreport and improves information transmission.

Keywords: cheap talk, experts, Forecasting, Laboratory experiments, reputation

JEL Classification: C91, D83

Suggested Citation

Meloso, Debrah C and Nunnari, Salvatore and Ottaviani, Marco, Looking into Crystal Balls: A Laboratory Experiment on Reputational Cheap Talk (October 2018). Available at SSRN: https://ssrn.com/abstract=3266423

Debrah C Meloso (Contact Author)

Toulouse Business School - TBS Education ( email )

Toulouse
France

Salvatore Nunnari

Bocconi University

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Via Roentgen 1
Milan, 20136
Italy

Marco Ottaviani

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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