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DP13231 | Looking into Crystal Balls: A Laboratory Experiment on Reputational Cheap Talk

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We experimentally study cheap talk by reporters motivated by their reputation for being well informed. Reputation is assessed by evaluators who see the report and the realized state of the world. In the laboratory, we manipulate the key drivers of misreporting incentives: uncertainty about the phenomenon to forecast and evaluators' beliefs. As predicted by theory, reporters are more likely to report truthfully when the state of the world is more uncertain and when evaluators conjecture that reporters always report truthfully. However, evaluators have difficulty learning reporters' strategies and tend to overreact to message accuracy, exacerbating reporters' incentives to misreport.