Cheap talk with outside options: a lab experiment

This paper provides experimental evidence for the theory of Che et al. (2013, Pandering to persuade, American Economic Review, 103(1), 47-79). Basic communication games with outside options developed by Che et al. (2013, Pandering to persuade, American Economic Review, 103(1), 47-79) are tested in the experiments, and experimental variations with additional conflicts over projects and with private information about outside options are also investigated. Moreover, in these games, strategies concerning delegation have been discussed as well. In general, the experimental results are aligned with the theoretical predictions. As the value of the outside options increases, communication becomes less informative and the experts may pander toward the conditionally better-looking project, the decision makers take their outside options more often and retain their decision rights with higher frequencies.