How much do people lie, and how much do people trust communication when lying is possible? An important step toward answering these questions is understanding how communication is interpreted. This paper establishes in a canonical experiment that competition can alter the shared communication code: the commonly understood meaning of messages. We study a sender-receiver game in which the sender dictates how to share $10 with the receiver, if the receiver participates. The receiver has an outside option and decides whether to participate after receiving a nonbinding offer from the sender. Competition for play between senders leads to higher offers but has no effect on actual transfers, expected transfers, or receivers' willingness to play. The higher offers signal that sharing will be equitable without the expectation that they should be followed literally: Under competition "6 is the new 5."
We thank Bora Erdamar, Andrew Gelman, Antonin Mace', and participants to the Columbia Experimental Lunch and to the 2018 ETH Workshop on Democracy for useful comments, and the National Science Foundation (grant SES-0617934) for financial support. The research was approved by Columbia University Institutional Review Board. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
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