Abstract
Theory suggests that mediated cheap talk has the potential to improve information sharing and welfare. This paper experimentally investigates whether and how this potential can be realized. We compare mediated (cheap) talk with direct (cheap) talk and explore the impact of language (that is, the framing of messages) on this comparison. We find that, consistent with theory, mediation facilitates information transmission, independent of the choice of the language. The majority of subjects appear to understand the effect of an exogenous mediator randomizing messages. At the same time, there are systematic departures from the theory prediction that keep behavior bounded away from complete separation (defined as the sender using a separating strategy and the receiver best responding to that strategy). These departures are largely consistent with some of the subjects perceiving mediated communication as direct communication. Receivers over-interpret messages (take messages as more informative than they are) under both direct and mediated talk. Under direct talk, there is initial overcommunication by senders that is attenuated with repeated interactions. Under mediated talk there is stable under-communication.
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