Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2007:4: More Communication, Less Cooperation: Experimental Evidence from Multi-stage Games

Ola Andersson () and Erik Wengström ()
Additional contact information
Ola Andersson: Department of Economics, Stockholm School of Economics, Postal: Department of Economics, Stockholm School of Economics, Sveavägen 65, SE-113 83 Stockholm , Sweded
Erik Wengström: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: It is well known that communication often serves as a facilitator for cooperation in static games. Yet, communication can serve entirely different purposes in dynamic settings as communication during the game may work as a means for renegotiation, potentially undermining the credibility of cooperative strategies. To explore this issue, this paper experimentally investigates cooperation and non-binding communication in a two-stage game. More specifically, two treatments are considered: one with only pre-play communication and one where subjects can also communicate intra-play between the stages of the game. The results highlight a nontrivial difference concerning the effects of pre-play communication between the two treatments. Pre-play communication only has a significant impact on cooperation when no intraplay communication is possible. The results suggest that the credibility of pre-play messages may depend crucially on future communication opportunities.

Keywords: Renegotiation; Communication; Cooperation; Experiments

JEL-codes: C72; C92

29 pages, First version: February 21, 2007. Revised: November 24, 2010. Earlier revisions: November 24, 2010.

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