This article explores the impact of free-flow computer-mediated communication (CMC) in trust-oriented bargaining and investigates the incentives to initiate discourse. CMC—typically in the form of electronic chat or notation—is becoming the norm to the relative discount of face-to-face. Looking at this type of discourse is very important given the movement in society toward CMC. Previous studies almost universally demonstrates that introducing communication to bargaining games encourages socially beneficial actions and improves overall welfare (Xiao and Houser, 2005; Buchan et al., 2006; Charness and Dufwenberg, 2006; Fiedler and Haruvy, 2009; Bicchieri et al., 2010; Andreoni and Rao, 2011; Ben-Ner et al., 2011; Chen and Chen, 2011). While a handful of recent studies look at modern communication modes (Greiner et al., 2012; Abatayo et al., 2017; Babin, 2020), few explore free-flow CMC explicitly as observed in the real world (see Omilion-Hodges and Ackerman, 2018).

This study aims to answer three economic questions. First, does free-flow, electronic messaging impact trust and related gains compared to no communication? Second, does one's role in a bargaining game impact the decision to initiate CMC? Finally, are there benefits related to the initiation of CMC, and if so, who realizes them? Our vehicle for answering these questions is an experimental “Investment game” (Berg et al., 1995) (henceforth “trust game”) allowing continuous chat until the final player action. This structure yields intuitive measures of trust, trustworthiness, and welfare and allows for the modeling of numerous interactions that require conditional judgment and reciprocity. A limitation of restricting communication to a pre-play condition is that the design will camouflage any informational gain associated with a first- or second-mover advantage. Free flow of communication makes more sense in a trust game and allows the researcher to examine the roles of discourse sequence and signaling content. We use the timestamps in chat logs to identify initiators and determine the impact of starting a chat on trust and welfare. The quality of our chat data is poor, made up of broken textspeak and emojis, and given the sample size, we cannot use contemporary NLP methods for textual analysis. Instead, we categorized our chats and found a significant number with cheap talk deals and screening content.

There is some reason to hypothesize that the first mover in a game would be the one to open a chat, even if mere cheap talk. Hernandez-Lagos (2019) finds that in settings with costless, free-form, and pre-play communication, players often cooperate with initiators (in a stag hunt). However, that study does not involve a sequential game nor allow freeform CMC during the process of committing to strategic actions. Before any strategic action occurs, the information environment can be awkward for decision-makers. When an agent decides on a choice of “words” in any communication mode, they implicitly decide how to position themselves in relation to a counterpart (Graham, 2015). One story paints CMC as a screening/signaling (s/s) mechanism. Studies show there is a demand-side effect for such information in trust games, as agents condition their actions to the expectations of counterparts (Eckel and Wilson, 2004; Wilson and Eckel, 2006; Eckel and Petrie, 2011). This hypothesis means that players may statistically discriminate counterparts as “favorable” or “unfavorable” types (e.g., Eckel and Grossman, 1998; Buchan et al., 2008; Delavande and Zafar, 2015; Capraro and Kuilder, 2016; Brañas-Garza et al., 2018; Babin, 2020) or may provide a signal to elicit a preferable stereotype. Screening helps to set payoff expectations, but not in the same way as receiving a financial offer or cheap talk statement of intent. Information about a counterpart's type (e.g., gender, race, cultural origin, or affective state) (1) may support the credibility of a promise or (2) serve as a substitute for a statement of intent, thus, inducing prosocial behavior in the trust game. If true, an implication of this notion is that the “trust game” often used in the lab is perceived by subjects as a Bayesian game (i.e., involving incomplete information).

Sequences in a conversation typically relate to who desires the discourse the most.¹ If trust is conditioned on a linguistic signal (e.g., a person's type), it is reasonable to expect first-movers (Investors) to initiate more frequently than second-movers (Responders). Second-movers may also be interested in information about the first to position themselves as trustworthy. However, in the trust game, sub-game perfection dictates there should be no amount of currency passed, and increased surplus can only occur when Investors send a positive amount. Therefore, any informational signal embedded in communication should be more valuable to the first-mover—the player with more to lose. The choice to initiate a chat may be a strategic action.

We find that trust increases dramatically with the introduction of free-flow CMC to one-shot interactions (consistent with the pre-play literature). First-movers are far more likely to be the first to send a message compared to second-movers. While there are no explicit benefits to initiating a chat, the average payoff gains in communication settings appear to go to second movers.

This study contributes in several ways. We illustrate how the initiation of a free-flow chat (and potential signaling content) impacts allocation. Each player in a trust game has the incentive to garner information via communication, assuming agents condition their actions on the judgments of their counterparts. Allowing free-flow chat into the trust game, we can identify the most likely initiator and isolate welfare gains by player roles. Our results support the previous findings that communication augments trust and welfare (e.g., Charness and Dufwenberg, 2006) while expanding beyond those settings. Additionally, we use mobile devices in the lab setting, adding a “taste of the field” to the design.

Our primary inquiries are whether free-flow electronic chat has any significant correlation with the roles of the players in the trust game, who initiates communication, and whether there are notable gains from being that player. Thus, we must compare trust and welfare measures with linguistic sequences in electronic chat logs.

We use a one-shot dual endowment trust game (Figure 1) following Aksoy et al. (2018) to eliminate inequality aversion as a factor. The game yields intuitive measures of trust as amounts sent, trustworthiness as a percentage of the amount returned, and welfare as payoffs in currency terms. Imposing sub-game perfection, the unique Nash equilibrium predicts no money is exchanged. In reality, this equilibrium is seldom seen in experimental settings, with payoffs being indicative of players seeking Pareto improvements from the Nash.

To isolate the effect of free-flow chat on the trust measures, we executed an experiment, allowing analysis of actions, chat logs by role and sequence, and subject characteristics. Students participated in a 1 x 2 between-subject design with random assignment: a baseline group (B1) plays a one-shot trust game with no communication and a treatment group (T1) plays a one-shot trust game with the ability to use CMC, including text chat and emojis. Previous studies have focused on “pre-play” messaging. Alternatively, we allowed for free-flow communication throughout the interaction in T1, ceasing at the final action. Subjects were unaware of the different treatment conditions of the experiment. They also completed an MPL risk aversion measure (Holt and Laury, 2002) and filled out a demographic questionnaire.

All components of the study were completed using the subjects' own mobile devices. When subjects arrived at a scheduled lab session, they signed a consent form and were instructed on how to connect to the instrument. Assistants seated subjects spaced apart and directed them not to converse. They were, however, given permission to text message or browse the Internet only until sessions were about to begin – intended as both a priming device and to minimize loss of control. Oral instructions were read aloud and projected onto an overhead screen; on a post-experiment questionnaire, 98.1% of participants indicated that the instructions were clear.

Subjects were paid in a separate room from the session and redeemed virtual earnings for cash at a ratio of 10 vc: US $1, plus the $5 participation fee. The study was carried out over seven sessions, ranging from 23 to 67 subjects, and took 35 min on average. The mean earnings per subject were $13.35; the study paid out a total of $4125. There was no deception throughout. The design is structured to test the following hypotheses:

H₁ and H₂ are tested to confirm treatment effects and put into the context of existing literature. H₃ suggests certain individuals are more likely to initiate CMC, while H₄ suggests initiation of chat carries some benefit or penalty; to test these, we restrict the analysis to the treatment, look at the time stamp of an initial message sent, then determine the role the initiator had in the trust game.

We recruited 270 volunteers from undergraduate classes at the University of Memphis. A characteristic breakdown of the sample is given in Table 1. Subjects were randomized into dyads. One observation of an Investor in treatment was dropped due to data collection errors. Out of 269 observations, 110 were in the control (55 dyads), 159 were in the treatment (79 dyads), and 1 Responder whose investor counterpart was dropped. Ten observations (5 dyads) involved no communication. Thus, our primary analysis involves 149 (74 dyads that communicated and 1 Responder whose Investor counterpart was dropped).

An underlying dimension of this study is the mobile device expertise of the subjects. Cross-platform matches presented a concern in that text and emoji images sent sometimes do not look exactly the same across different mobile platforms. This was not a common occurrence; over the entire sample. Three subjects raised concerns about technical limitations occurring with their devices. These subjects were paid the $5 participation fee and dismissed; they are not in the dataset.

Figure 2 depicts the treatment effects across the trust variables. Allowing free-flow chat results in vc 28 ($2.80) more sent on average compared to the baseline (Mann-Whitney, p < 0.001). These results allow us to reject the null N₁. Trustworthiness is roughly 22% higher in the CMC treatment; however, that difference is not significant.

A result expected from the increased trust levels, the average payoffs are vc 26.60 greater with free-flow CMC, compared to the baseline without (Mann-Whitney, p=0.006), allowing us to reject the null that they are unchanged. However, this nonparametric analysis makes it challenging to see the distribution of gains across roles in the trust game. The Appendix provides a summary table of welfare gains by roles and initiation of communication.

To estimate treatment effects, we employed a Tobit regression scheme, as suggested by Moffatt (2015). Table 2 details estimates for the trust variables and payoffs across the pooled sample. Subjects in the CMC treatment send vc 32.27 ($3.22, p < 0.001) and earn vc 48.62 ($4.86), p < 0.001) more on average than those without the ability to chat. However, second-movers do not return a higher percentage compared to the baseline. As a result, first-movers see significantly reduced payoffs of vc 47.19 ($4.71, p < 0.001) in the trust game overall and incur an additionally decreased payoff of vc 43.77 ($4.37, p < 0.001) when chat is an option, for a total net effect of vc –90.96 ($9.09). These results suggest that Investors (perhaps optimistically) send more with CMC while Responders tend toward the subgame Nash of returning nothing.

The goal of this experiment was to identify how incorporating free-flow electronic messaging (CMC) can affect behavior in the trust game, isolate associated welfare gains, and identify the role most likely to initiate chat. Using sequential linguistic analysis of dyadic chats, we found a significant number has cheap talk deals and screening or signaling content. We show that levels of trust and average payoffs increase with the inclusion of CMC.

The first main takeaway is that free-flow communication matters in trust decisions leading to welfare gains. Ultimately, those windfalls go to second-movers. This accents the current state of the literature. Second, first-movers initiate chats far more often than second-movers. However, few benefits are directly tied to being the initiator of discourse. Both parties in a dyadic trust relationship have important strategic considerations and move conditional on the expectations of others. A priori beliefs typically guide these expectations, but so will any information obtained. However, communication is not required but rather volunteered. Thus, we believe that this is a screening story in which cheap talk rules. However, there are two other role dependent explanations: (1) by the nature of their first-mover status in the trust game, Investors may perceive a cognitive imperative to be the leader in discourse, and (2) less cooperative Responders do not initiate as they do not want to commit to an action; thus Investors are forced to initiate. There might be disutility associated with the absence of discourse, and the Investors take it upon themselves to alleviate the awkwardness.

We considered that the first to chat might be an attempt to “misrepresent” themselves as a player type generally considered a preferable counterpart, muting the screening effect of initiation. At the same time, much of the banter involves more traditional cheap talk bargaining (unaccepted offers). Exploring these concurrent exchanges would require a deeper analysis of chat logs (such as using NLP) from a far larger sample, and we leave these concerns to future research.

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

The studies involving human participants were reviewed and approved by University of Memphis Institutional Review Board, #PRO-FY2017-5. The patients/participants provided their written informed consent to participate in this study.

All authors listed have made a substantial, direct, and intellectual contribution to the work and approved it for publication.