Noisy Commitments: The Impact of Information Accuracy on Efficiency

23 Pages Posted: 28 Feb 2006

See all articles by Andreas Nicklisch

Andreas Nicklisch

University of Hamburg - School of Business, Economics and Social Sciences; Max Planck Institute for Research on Collective Goods

Eyal Ert

The Hebrew University of Jerusalem, Dept. of Environmental Economics and Management

Date Written: February 2006

Abstract

We report an experiment designed to test the influence of noisy commitments on efficiency in a simple bargaining game. We investigate two different levels of commitment reliability in a variant of the peasant-dictator game. Theoretical analysis suggests that the reliability of commitments in this game does not affect efficiency. We find that accurate commitments promote efficiency, as expected by game theory. However, noisy commitments are found to impair efficiency. We explain this effect by the differences between incentives off the equilibrium path under conditions of accurate commitments and noisy commitments. This difference changes the game structure and in the current game facilitates more random responses.

Keywords: Commitments, efficiency, experimental economics, information, trust

JEL Classification: C7, C91, L15

Suggested Citation

Nicklisch, Andreas and Ert, Eyal, Noisy Commitments: The Impact of Information Accuracy on Efficiency (February 2006). MPI Collective Goods Preprint No. 2006/4, Available at SSRN: https://ssrn.com/abstract=887263 or http://dx.doi.org/10.2139/ssrn.887263

Andreas Nicklisch (Contact Author)

University of Hamburg - School of Business, Economics and Social Sciences ( email )

Von-Melle-Park 5
Hamburg, D-20354
Germany

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany
49 228 9141679 (Phone)
49 228 9141655 (Fax)

HOME PAGE: http://www.coll.mpg.de/nicklisch.html

Eyal Ert

The Hebrew University of Jerusalem, Dept. of Environmental Economics and Management ( email )

P.O. Box 12
Rehovot, 76100
Israel

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