Common-value public goods and informational social dilemmas

Abstract

We experimentally examine the role of private information and communication in a public goods environment with uncertain returns. We consider a public goods game in which the Marginal Per Capita Return (MPCR) is either high or low. Before contributing, three players observe private signals correlated with the true MPCR and then send cheap talk messages to one another. There are social gains from truthful communication, but a private incentive to exaggerate. We compare treatments with and without cheap talk, finding that messages are largely truthful and influence contribution decisions. In further treatments, we increase the incentive to exaggerate and find reduced truthfulness and smaller gains from communication.