"Mediated Talk: An Experiment" (December, 2022) with Ernest K. Lai and Wooyoung Lim, Journal of Economic Theory (forthcoming)
Abstract: We experimentally compare mediated (cheap) talk with direct (cheap) talk. Theory, guided by a characterization of equilibria in both environments, suggests that mediated talk has the potential to improve information sharing and welfare relative to direct talk. We sharpen the theory prediction by invoking Crawford's (2003) language-anchored level-k analysis. In the experiment, we find that mediated talk can indeed facilitate information transmission. We also find, however, that this requires that the language employed conforms with the mediation mechanism: mediation mechanisms improve information sharing for a variety of conforming languages, but fail to do so with a nonconforming language. These experimental findings match the predictions from the language-anchored level-k analysis. Strikingly, this is the case even when a whole array of alternative selection criteria (including iterative deletion of dominated strategies, strict equilibrium, Pareto efficiency, etc.) make a unique common prediction that sharply disagrees with the language-anchored level-k prediction.
"Incomplete Contracts versus Communication" [October 2022], Journal of Economic Theory
(with Inga Deimen and Sean Inoue)
Abstract: We consider a principal's choice between either controlling an agent's action through an incomplete contract or guiding him through non-binding communication. The principal anticipates receiving private information and must hire an agent to take an action on her behalf. Contracts can only specify a limited number of actions as a function of the state. The principal is at liberty not to specify actions for some of the states. States not covered by the contract induce a communication game. Contract clauses create gaps in the state space of the communication game, which can be used to generate distance between communication events. This relaxes incentive constraints for communication, helping enable and structure influential communication. We find that close alignment of interests favors communication and, thus, ceding authority to the agent, while strong misalignment favors reliance on contracts. In the uniform-quadratic environment, optimal contracts that induce influential communication split the communication region: there are at least two communication actions separated by contract actions. For sufficiently closely aligned interests, it is also the case that communication splits the contract region: there are at least two contract actions separated by a communication action.
"Quid pro Quo: Friendly Infromation Exchange between Rivals" [2022], Theoretical Economics
(with In-Uck Park)
Abstract: We show that information exchange via disclosure is possible in equilibrium even when it is certain that whenever one party learns the truth, the other loses. The incentive to disclose results either from an expectation of disclosure being reciprocated—the quid pro quo motive—or from the possibility of learning from the rival’s failure to act in response to a disclosure—the screening motive. Alternating and gradual disclosures are generally indispensable for information exchange and the number of disclosure rounds grows without bound if the agents’ initial information becomes sufficiently diffuse; in that sense, the less informed agents are, the more they talk. Patient individuals can achieve efficiency by means of continuous alternating disclosures of limited amounts of information. This provides a rationale for protracted dialogues.
"Strategic information transmission: a survey of experiments and theoretical foundations" [2020], Handbook of Experimental Game Theory
(with Ernest K. Lai and Wooyoung Lim)
Abstract: This paper surveys the experimental literature on communication of private information via cheap-talk messages. Some players have private information that is relevant to the decisions made by others. The informed players have the option to send messages before decisions are made. Messages do not directly affect payoffs but can link decisions to information. This simple paradigm has been found useful in philosophy, linguistics, economics, political science and theoretical biology. The survey tracks the dialogue between the theory and experiments that have been inspired by this paradigm and is organized around the themes of available language, payoff structure and compositions of the sets of communicating players.
"Dynamic Coordination via Organizational Routines" [2020], Economic Theory, published online, July 2020
(with April Mitchell Franco and Paul Heidhues)
Abstract: The organizational behavior literature refers to persistent interaction patterns among members of an organization with distributed knowledge as organizational routines. To formalize this concept, as well as intuitions about organizational routines, we investigate dynamic coordination within a problem-solving team where team members cannot communicate. Each team member has a finite number of actions. There is a single action profile with a positive payoff. The task is to identify that profile through repeated trials. For each of their actions, team members have private information regarding their confidence in that action being required for a solution. In this environment, we refer to deterministic sequences of action profiles, where actions are labeled according to their confidence ranking, as organizational routines. We show that there are equilibria that give rise to organizational routines. These organizational routine equilibria partially solve the team’s coordination problem by synchronizing the team’s search efforts. These organizational routine equilibria are resilient to changes in the environment by being ex post equilibria, to agents having only a coarse understanding of other agents’ strategies by being fully cursed, and to natural forms of agents’ overconfidence. If the distribution over team members’ confidences is sufficiently dispersed, this resilience of organizational routine equilibria comes at the price of suboptimality. In contrast, generically, when this distribution is sufficiently concentrated, optimal equilibria induce organizational routines.
"Eliciting Private Information with Noise: The Case of Randomized Response" [2019], Games and Economic Behavior 113, 356-380.
(with Ernest K. Lai and Wooyoung Lim)
Abstract: Theory suggests that garbling may improve the transmission of private information. A simple garbling procedure, randomized response, has shown promise in the field. We provide the first complete analysis of randomized response as a game and implement it as an experiment. We find in our experiment that randomized response increases truth-telling and, importantly, does so in instances where being truthful adversely affects posterior beliefs. Our theoretical analysis also reveals, however, that randomized response has a plethora of equilibria in addition to truth-telling equilibria. Lab behavior is most consistent with those informative but not truth-telling equilibria.
"Failure of Common Knowledge of Language in Common-Interest Communication Games" [2018], Games and Economic Behavior 109, 132-155.
Abstract: This paper explores higher-order uncertainty about message availability in communication games with perfectly aligned preferences. It can be impossible to achieve ex post efficiency in equilibrium even when it is mutual knowledge that the size of the set of available messages would be sufficient to convey all payoff-relevant information. There are equilibria that achieve ex post efficiency whenever a rich language condition is satisfied: the set of available messages is large relative to the sender's assessment of the number of information sets of the sender the receiver considers possible. Weaker conditions suffice if one adopts an ex ante perspective.
"Pre-Play Communication with Forgone Costly Messages: Experimental Evidence on Forward Induction" [2017], Experimental Economics 20, 368-395. (with Peter H. Kriss, and Roberto A. Weber)
Abstract: We experimentally study optional costly communication in Stag-Hunt games. Prior research demonstrates that efficient coordination is difficult without a communication option but obtains regularly with mandatory costless pre-play messages. We find that even small communication costs dramatically reduce message use when communication is optional, but efficient coordination can occur with similar frequency as under costless communication. These findings can be accounted for by formalizations of forward induction that take Nash equilibrium as a reference point (such as Kohlberg and Mertens in Econometrica 54: 1003–1037, 1986; Govindan and Wilson in Econometrica 77: 1–28, 2009), while formalizations that only appeal to (higher-order) knowledge of rationality remain silent in this environment.
"Coordination with Decentralized Costly Communication" [2016] Journal of Economic Behavior & Organization 130, 225-241. (with Peter H. Kriss and Roberto A.Weber)
Abstract: Prior experimental evidence finds decentralized pre-play communication to facilitate efficient coordination among interdependent agents. However, the kind of communication in these experiments is unrealistic for many economic and organizational contexts, as it consists of costless messages from every agent, which are sent every time a coordination game is played. We study how communication use and its effectiveness change when one considers that sending messages is often both costly and voluntary, and investigate the effectiveness of alternative communication policies employed by a firm. The policies differ in the degree to which message use is voluntary and in who bears the costs for communication. Imposing even small communication costs on employees dramatically reduces message use, but message use is more prevalent and efficient coordination occurs more frequently when the proportion of message costs borne by employees is small. We conclude that under certain conditions, large but incomplete subsidies for using communication can be an optimal solution for obtaining efficient coordination in firms.
"Intentional Vagueness" [2014], Erkenntnis 79, 855-899. (with Oliver Board)
Abstract: This paper analyzes communication with a language that is vague in the sense that identical messages do not always result in identical interpretations. It is shown that strategic agents frequently add to this vagueness by being intentionally vague, i.e. they deliberately choose less precise messages than they have to among the ones available to them in equilibrium. Having to communicate with a vague language can be welfare enhancing because it mitigates conflict. In equilibria that satisfy a dynamic stability condition intentional vagueness increases with the degree of conflict between sender and receiver.
"Language Barriers" [2013], Econometrica 81, 781-812. (with Oliver Board)
Abstract: Different people use language in different ways. We capture this by making language competence—the set of messages an agent can use and understand—private information. Our primary focus is on common-interest games. Communication generally remains possible; it may be severely impaired even with common knowledge that language competence is adequate; and, indeterminacy of meaning, the confounding of payoff-relevant information with information about language competence, is optimal.
"A Class of Strategy-Correlated Equilibria in Sender-Receiver Games" [2012], Games and Economic Behavior 75, 510-517.
Abstract: This paper shows that the efficiency bound for communication equilibria identified by Goltsman et al. (2009) in the leading example of the Crawford–Sobel model can be obtained with strategy-correlated equilibria, thus preserving privacy vis-a-vis the mediator. More generally, all equilibrium outcomes of the epsilon-noise model of Blume et al. (2007), including outcomes with an uncountable infinity of equilibrium actions, can be obtained via strategy-correlated equilibria of the noise-free game. The occasional mismatch between the encoding and decoding rules used by sender and receiver in a strategy-correlated equilibrium can be interpreted as uncertainty about language use.
"Noisy Talk" [2007], Theoretical Economics 2, 395-440. (with Oliver Board and Kohei Kawamura)
Abstract: We investigate strategic information transmission with communication error, or noise. Our main finding is that adding noise can improve welfare. With quadratic preferences and a uniform type distribution, welfare can be raised for almost every bias level by introducing a sufficiently small amount of noise. Furthermore, there exists a level of noise that makes it possible to achieve the best payoff that can be obtained by means of any communication device. As in the model without noise, equilibria are interval partitional; with noise, however, coding (the measure of the message space used by each interval of the equilibrium partition of the type space) becomes critically important.