Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/295759 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 16736
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
For many decisions, people rely on information received from others by word of mouth. How does the process of verbal transmission distort economic information? In our experiments, participants listen to audio recordings containing economic forecasts and are paid to accurately transmit the information via voice messages. Other participants listen either to an original recording or a transmitted version and then state incentivized beliefs. Our main finding is that, across a variety of transmitter incentive schemes, information about the reliability of a forecast is lost in transmission more than twice as much as information about the forecast's level. This differential information loss predictably distorts listeners' belief updates: following transmission, reliable and unreliable messages converge in influence and average belief updates from new information are weakened. Mechanism experiments show that the differential loss is not driven by transmitters deliberately trading off the costs and benefits of transmitting different kinds of information. Instead, it results from memory constraints during transmission, which can be overcome through targeted reminders.
Subjects: 
information transmission
word-of-mouth
narratives
reliability
JEL: 
C90
D91
D83
Document Type: 
Working Paper

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