Economics BEAT Seminar - Lata Gangadharan (Monash)
Tuesday, 05 May 2026 at 13:30
Economics BEAT Seminar - Lata Gangadharan (Monash) "Communication, Guilt, and Agency Risk with Payoff Externalities"
Event details
Communication is effective in enhancing cooperation in strategic settings. This study examines situations where actions of principals and agents not only affect payoffs within the agency relationship but also have payoff externalities impacting others. Social efficiency is maximized only if all parties cooperate. We design an experiment to investigate how different types of communication affect cooperation and efficiency. Communication is hypothesized to impact beliefs, which affect the psychological costs, in particular, guilt, of choosing certain actions. A baseline treatment allows no communication opportunities. Two communication treatments introduce (a) a single, private message from the agent to the principal in each pair; and additionally, (b) chat between all agents and principals whose payoffs are affected by actions. Participants provide complete, incentivized first and second order beliefs. Communication among all players significantly increases the cooperative choices of all player types while communicating only via the single private message increases cooperative choices by principals but not agents. Beliefs are consistent with the observed behavior; in particular, we also observe an asymmetric influence of the single private message on first and second order beliefs of the principals and agents, indicating that beliefs impact cooperative choices in a manner consistent with simple guilt aversion.
Organiser
University of Exeter Business School - Economics
Location
Pearson Teaching Room (Building One)