Ulric B. and Evelyn L. Bray Social Sciences Seminar

Abstract: How much do people lie, and how much do people trust communication when lying is possible? An important step towards answering these questions is understanding how communication is interpreted. This paper establishes in a canonical experiment that competition can alter the shared communication code: the commonly understood meaning of messages. We study a Sender-Receiver game in which the Sender dictates how to share $10 with the Receiver, if the Receiver participates. The Receiver has an outside option and decides whether to participate after receiving a non-binding offer from the Sender. Competition for play between Senders leads to higher offers but has no effect on actual transfers, expected transfers, or Receivers' willingness to play. The higher offers signal that sharing will be equitable without the expectation that they should be followed literally: under competition "6 is the new 5."

The paper was co-authored with Navin Kartik, Luis Sanchez, and Sebastien Turban.