Competition, preference uncertainty, and jamming: A strategic communication experiment

We conduct a game-theoretic laboratory experiment to investigate the nature of information transmission in a communication environment featuring competition and information asymmetry. Two senders have private information about their preferences and simultaneously send messages to a receiver in a one-dimensional space with a large number of states, actions, and messages. We find that equilibrium predictions fare poorly and that senders overcommunicate by consistently exaggerating their messages. Over time, exaggeration increases and communication unravels. Our analysis suggests that exaggeration and unraveling can only be partially explained by bounded rationality models of iterated reasoning or belief learning. Instead, behavior is consistent with a naive form of exaggeration in which senders know they must exaggerate, but they do so in an understated way that is less responsive to their private information or to opponents’ past behavior than would be fully optimal.