How do individuals achieve "good outcomes" in one-shot strategic situations? One much-explored possibility is that they engage in some kind of preplay communication -- cheap talk -- in which they endeavor to convince one another of the actions they intend to play. However, there may be no incentive for such communication to be truthful, or even informative. Another, less explored, possibility is that individuals take account of their knowledge of the past behavior of others when deciding which actions to play. While these two possibilities have been considered separately, there has been no research examining the relative efficacy of these two devices for the achievement of good outcomes. This paper reports the results from an experiment with human subjects that allows for such a comparison. The effects of cheap talk and observation of past actions are compared with each other, and with the standard (control) case where neither cheap talk nor observation is allowed. We consider three di...

We study individual decision making in a lottery-choice task performed by three different populations: gamblers under psychological treatment ("addicts"), gamblers ’ spouses ("victims"), and people who are neither gamblers or gamblers’ spouses ("normals"). We find that addicts are willing to take less risk than normals, but the difference is smaller as a gambler’s time under treatment increases. The large majority of victims report themselves unwilling to take any risk at all. However, addicts in the first year of treatment react more than other addicts to the different values of the risk-return parameter.

We report the results of an experiment in which subjects play games against changing opponents. In one treatment, “senders” send “receivers” messages indicating intended actions in that round, and receivers observe senders’ previous-round actions (when matched with another receiver). In another treatment, the receiver additionally observes the sender’s previous-round message to the previous opponent, enabling him to determine whether the sender had lied. We find that allowing multiple signals leads to better outcomes when signals are aligned (all pointing to the same action), but worse outcomes when signals are crossed. Also, senders’ signals tend to be truthful, though the degree of truthfulness depends on the game and treatment, and receivers’ behaviour combines elements of pay-off maximization and reciprocity.

We perform an experimental test of a modification of the controversial canonical mechanism for Nash implementation, using three subjects in non-repeated groups, as well as three outcomes, states of nature, and integer choices. We find that this mechanism successfully implements the desired outcome a large majority of the time, providing empirical evidence for the feasibility of such implementation. In addition, the performance is further improved by imposing a fine on a dissident, so that the mechanism implements strict Nash equilibria. While our environment is stylized, our results offer hope that experiments can identify reasonable features for practical implementation mechanisms.