Working Paper: CEPR ID: DP7563
Authors: David J. Cooper; Kaiuwe Khn
Abstract: We use experiments to analyze what type of communication is most effective in achieving cooperation in a simple collusion game. Consistent with the existing literature on communication and collusion, even minimal communication leads to a short run increase in collusion. However, in a limited message-space treatment where subjects cannot communicate contingent strategies, this initial burst of collusion rapidly collapses. When unlimited pre-game communication is allowed via a chat window, an initial decline in collusion is reversed over time. Content analysis is used to identify multiple channels by which communication improves collusion in this setting. Explicit threats to punish cheating prove to be by far the most important factor to successfully establish collusion, consistent with the existing theory of collusion. However, collusion is even more likely when we allow for renegotiation, contrary to standard theories of renegotiation. What appears critical for the success of collusion with renegotiation is that cheaters are often admonished in strong terms. Allowing renegotiation therefore appears to increase collusion by allowing for an inexpensive and highly effective form of punishment.
Keywords: collusion; communication; experiments; guilt aversion; renegotiation; trust
JEL Codes: C72; C73; C92; D03; D43; L13; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| minimal communication (Y20) | temporary increase in collusion (D74) |
| temporary increase in collusion (D74) | collapse of collusion (D74) |
| unlimited pregame communication (L96) | initial decrease in collusion (L12) |
| unlimited pregame communication (L96) | recovery in collusive behavior over time (D43) |
| explicit threats (Y50) | lower probability of cheating (C70) |
| renegotiation (C78) | enhance collusion (D74) |
| shadow of future retribution (D84) | support for collusion (K21) |
| communication (L96) | coordination on necessary punishments (K40) |