Watch your words: an experimental study on communication and the opportunity cost of delegation

Antinyan, Armenak ORCID: https://orcid.org/0000-0001-9960-3618, Corazzini, Luca, D'Agostino, Elena and Pavesi, Filippo 2023. Watch your words: an experimental study on communication and the opportunity cost of delegation. Journal of Economic Behavior and Organization 214 , pp. 216-232. 10.1016/j.jebo.2023.07.036

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Abstract

We investigate how the opportunity cost of delegation influences the impact of communication on trust, trustworthiness and communication style. To do this, we adopt a modified trust game in which the trustee may send a message to the trustor, before the latter chooses whether to delegate decision rights to the former. Our analysis shows that, only when the opportunity cost of delegation is high does communication have a positive effect on the beliefs (first and second order) relative to the amount the trustor will receive if he chooses to delegate, as well on the trustee's beliefs on the probability of delegation occurring. This implies that the incentives to use communication to increase trust are greater when the opportunity cost of delegation is higher, even if it does not affect the decision to delegate and is associated with deception. Regarding communication style, our analysis shows that non-precise promises are used more frequently when the opportunity cost of delegation is low, and the trustor has less to lose from delegating. We also document an “illusion effect” whereby trustees erroneously expect non-precise promises to have an impact on the beliefs of trustors.

Item Type:	Article
Date Type:	Published Online
Status:	Published
Schools:	Business (Including Economics)
Additional Information:	License information from Publisher: LICENSE 1: URL: http://creativecommons.org/licenses/by-nc-nd/4.0/, Start Date: 2024-08-17
Publisher:	Elsevier
ISSN:	0167-2681
Date of Acceptance:	27 July 2023
Last Modified:	06 Jan 2024 02:16
URI:	https://orca.cardiff.ac.uk/id/eprint/161971

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