Self-serving cheap talk: A test of Aumann's conjecture

The effectiveness of pre-play communication in achieving efficient outcomes has long been a subject of controversy. Aumann conjectures that, in a vari ant of the Stag Hunt game, "an agreement to play [the efficient outcome] co nveys no information about what the players will do" and thus should not af fect behavior. Farrell and Rabin suspect that cheap talk will achieve effic iency. Results show impressive coordination when the sender first chooses a signal and then an action. Without communication, efforts to achieve effic iency are largely unsuccessful. As Farrell suggests, reversing the order of the action and signal appears to change players' behavior. Journal of Econ omic Literature Classification Numbers: A13, C72, C91, D82, D84. (C) 2000 A cademic Press.