What makes communication informative? Cheap talk with multiple senders
Mehmet Yiğit Gürdal
03 March 2021
Abstract: We investigate communication and decision making in a signalling game that is a simplified version of many real–life settings. There are two senders and one receiver. Each sender knows both senders’ qualities, while the receiver is completely uninformed. After a round of communication, the receiver chooses to match with one of the senders. The receiver prefers to match with the higher–quality sender, while each sender simply prefers to be matched. We vary the form of communication. In our Byte treatment, a sender sends a single number, indicating her quality. In our Rich treatment, a sender sends a single free–form text message. In our Chat treatment, the receiver can chat with each sender individually, in simultaneous two–way conversations. Our main result is that receivers in the Chat treatment perform substantially better than chance in picking the higher–quality sender, while receivers in the other treatments fare no better than chance. Additional results suggest that communication in the Chat treatment allows the receiver to extract a body of information that is more likely to be (i) precise and (ii) consistent in its implication for decision making. Receivers in all treatments fare well when both (i) and (ii) are present, and poorly otherwise.