Is It What You Say or How You Say It?

Abstract

Studies show that free-form communication facilitates cooperation better than restricted communication. We investigate the reasons for this by comparing various communication protocols in a sequential game where the buyer sets the price and then the seller determines the quality. At the beginning of the game, the seller is allowed to send the buyer a restricted promise, a restricted threat, a free-form message, or a message selected from a set of previously constructed free-form messages. We find that (i) a restricted threat is ineffective but a restricted promise significantly promotes cooperation; (ii) a free-form message promotes cooperation more than a restricted promise whereas a selected free-form message does so as effectively as a restricted promise; (iii) a free-form message frequently raises notions of promise and honesty, and thus enhances cooperation; and (iv) a constructed message is more effective than a selected message in fostering cooperation. Our results indicate that the self-constructed nature of free-form communication underlies its superiority to restricted communication for the promotion of cooperation.

Keywords: communication, promise, threat, cooperation, commitment

JEL Classification: C92, D83