Only the illusion of possible collusion? Cheap talk and similar goals: Some experimental evidence

Marian Chapman Moore, Ruskin M. Morgan, Michael Moore

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

Firms routinely engage in public communications that are available to various constituencies, including competitors. In a laboratory experiment with prisoner's dilemma payoffs, the authors investigate the effect of one form of these communications - cheap talk signals: statements that are costless, nonbinding, and nonveriflable and do not directly affect the payoffs for either party. The authors find that only competitors that perceive that they share goals for a joint, coordinated outcome correctly update their beliefs about their competitor's next move on the basis of cheap talk signals. The authors contend that the conditions for cheap talk to work may be so rare that cheap talk is more likely to fall on deaf ears than to result in collusion. The authors suggest implications for managers and public policymakers as well as areas for further research.

Original languageEnglish (US)
Pages (from-to)27-37
Number of pages11
JournalJournal of Public Policy and Marketing
Volume20
Issue number1
DOIs
StatePublished - Jan 1 2001

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Marketing

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