Journal of Political Economy Vol. 127 No. 4 2019
On the Empirical Content of Cheap-Talk Signaling: An Application to Bargaining
Abstract
We outline a framework for the empirical analysis of signaling games based on three features: sorting, incentive compatibility, and beliefs. We apply it to document cheap-talk signaling in the use of round-number offers during negotiations. Using millions of online bargaining interactions, we show that items listed at multiples of $100 receive offers that are 8–12 percent lower but are 15–25 percent more likely to sell, demonstrating the trade-off requisite for incentive compatibility. Those same sellers are more likely to accept a similar offer, and buyers are more likely to investigate their listings, consistent with seller sorting and buyer belief updating.
- DOI
- 10.1086/701699
- Volume
- 127
- Issue
- 4
- Pages
- 1599-1628
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib