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

Journal Article (Journal Article)

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.

Full Text

Duke Authors

Cited Authors

  • Moore, MC; Morgan, RM; Moore, MJ

Published Date

  • January 1, 2001

Published In

Volume / Issue

  • 20 / 1

Start / End Page

  • 27 - 37

Electronic International Standard Serial Number (EISSN)

  • 1547-7207

International Standard Serial Number (ISSN)

  • 0743-9156

Digital Object Identifier (DOI)

  • 10.1509/jppm.20.1.27.17282

Citation Source

  • Scopus