On the Limits of Cheap Talk for Public Good Provision

Francisco J. M. Costa, Humberto Moreira
2012 Social Science Research Network  
We study a situation where, as a consequence of private information, agents do not have the incentive to invest in a public good if they are unable to have prior discussion with their partners. We show that in a voluntary contribution mechanism with cheap talk, any finite message space does not provide efficiency gain relative to a binary message space when agents truthfully report their type. Using laboratory experiments, we observe that communication is a useful mechanism to enhance
more » ... , mainly by allowing players to coordinate on the zero contribution when the project is not desirable for at least one of them. However, we find that such efficiency gain seems to be very limited, since the simplest communication structure ("Yes" or "No" messages) provides the same incentives to the agents as larger message spaces. JEL codes: C72; C91; D83; H41.
doi:10.2139/ssrn.2029331 fatcat:dyxuasm34vcxpdzbgfvoedquby