Economics serving society

Coordination with Communication under Oath

Nicolas Jacquemet, Stéphane Luchini, Jason Shogren et Adam Zylbersztejn

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Coordination games aim to study economic situations in which the isolated decisions of individuals who comprise a group (a society, a market, etc.) lead to lesser results than would be collectively possible were the decisions coordinated. The study of these coordination failures applies to a large range of economic problems, such as international coordination of economic policies, macroeconomic fluctuations, behaviour on financial markets (speculative attacks and bubbles, runs on banks) and the organisation of production processes inside a firm. Since these problems arise from the absence of links between individuals when decisions are taken, one tool often proposed to restore efficiency in this kind of situation is to offer to those involved the possibility of exchanging information, through communication, before they make their decisions. The general lesson that emerges from such work is that communication results in little improvement in the capacity to coordinate.
In this article, Jacquemet, Luchini, Shogren and Zylbersztejn advance the hypothesis that the (relative) failure of communication in this context results from its lack of credibility: individuals have no reason to keep their word, not even to transmit honestly the information at their disposal, even though everyone would benefit from it. The social psychology of involvement offers a solution to this problem. It shows that individual behaviour is affected by the sequence of actions in which he or she participates: a person willing to tell someone else what time it is, for example, will also be more inclined to help that same unknown person with a little money to ride public transport. Telling someone the time is an act of involvement. The study applies this idea through social science experiments to communication in coordination games. The authors show that the coordination of decisions that results from communication is clearly improved (by more than 50 per cent) when the individuals have previously agreed to sign an oath to tell the truth. In this context, the information transmitted is more reliable and the individuals keep their word more often. The decision to sign constitutes an engagement in sincerity that alters the communication behaviour. The use of tools of engagement also restore some credibility to communication and improve the situation of the totality of group members.

Original title of the article : “Coordination with Communication under Oath”
Published in : Document de travail du Greqam
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