Restricted and free-form cheap-talk and the scope for efficient coordination

Abstract

This paper is the first to compare the efficiency-enhancing capacity of two communication protocols in experimental stag-hunt games. The traditional restricted protocol that allows communicating intentions only fails to improve efficiency over the no-communication conditions. When players are allowed to send any messages (free-form), the majority of them send messages that underscore a reason for which players should choose the efficient action. To explore further whether the absence of such a richer message in the traditional restricted communication protocol can be the cause of its ineffectiveness, we ran an additional treatment that included the intention-based message as well as a reason-based message. The data show that the richer restricted communication is as effective as free-form communication, and that reason-based messages are an effective efficiency-enhancing device in this class of coordination games regardless of whether the protocol is restricted or free-form.