The Value of Cheap-Talk and Costly Signals In Coordinating Market Entry Decisions

Signaling occurs when a firm attempts to indicate, truthfully or not, its intendedcourse of action. Competitors often use signaling in market entry situationsto coordinate actions, or possibly to deter entry by other firms. This paperexamines the value of cheap talk and costly signaling in a large group marketentry game. Eighty subjects, twenty in each of four groups, participated in acomputer-controlled decision making experiment. After...