Teams versus individuals in pre-play cheap talk communication

Abstract

In a lab experiment, we compare team and individual play in a coordination game with incomplete information, with and without pre-play cheap talk communication. We find that when both agents are of middle types, teams perform slightly better than individuals without communication but significantly worse with communication. Consequently, cheap talk precommunication does not improve coordination when both teams are of middle types due to the fact that with communication teams exaggerate their types significantly more and are more likely to choose their preferred action conditional on messages sent when they are of middle types.