Abstract

Applied economics studies have started using cheap talk to mitigate hypothetical bias in stated preference studies. Despite some contradictory evidence about cheap talk's effectiveness, no known cheap talk study has taken into account how subjects' perception of the complexity of the experimental task can influence cheap talk's effectiveness in reducing hypothetical bias. Using a choice experiment, our results suggest that perceived complexity of the task has a significant impact on cheap talk's effectiveness in reducing hypothetical bias. The cheap talk script was effective only when subjects considered the task to be easy. Hence, the complexity of the task affects cheap talk's effectiveness, which may explain some of the contradictory results relating to the effectiveness of the use of cheap talk in past studies.