Quantitative Economics: Nov, 2018, Volume 9, Issue 3

Meaning and credibility in experimental cheap‐talk games

Ernest K. Lai, Wooyoung Lim

We design experimental games to evaluate the predictive power of the first cheap‐talk refinement, neologism‐proofness. In our first set of treatments designed to evaluate the refinement with its usual emphasis on literal meanings, we find that a fully revealing equilibrium that is neologism‐proof is played more often; senders deviate from an equilibrium in a way that can be predicted by the credibility of the neologism; and receivers' behavior indicates that they understand senders' deviating incentives. Our second set of treatments evaluates neologism‐proofness from an evolutionary perspective in the absence of a common language. We find that the proportion of observations in which the meaning of a neologism evolves to disrupt a prevailing fully revealing equilibrium is lower when the equilibrium is neologism‐proof. Our findings shed light on the capabilities and limitations of the refinement concept in predicting laboratory behavior under different language environments.
Neologism‐proofness cheap talk equilibrium refinement evolution of meanings laboratory experiment C72 C92 D82 D83

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