Communication, Renegotiation, and the Scope for Collusion

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Abstract

We study the effect of communication in an experimental game where cooperation is consistent with equilibrium play if players share an understanding that cheating will be punished. Consistent with communication acting as a coordinating device, credible preplay threats to punish cheating are the most effective message to facilitate collusion. Promises to collude also improve cooperation. Credible threats do not occur in a treatment with a limited message space that permits threats of punishment. Contrary to some theoretical predictions, renegotiation possibilities facilitate collusion.
Original languageEnglish
Pages (from-to)247-278
Number of pages32
JournalAmerican Economic Journal: Microeconomics
Volume6
Issue number2
DOIs
Publication statusPublished - 1 May 2014

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