“Liar, Liar... ”

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Abstract
An abstract public goods setting is considered in which individually rational strategies lead to collectively irrational outcomes. Theorists argue that individual reputations can provide an important means for solving repeated versions of that public goods game. Numerous experimental findings also show that preplay communication leads to higher rates of contributions to public goods. The authors investigate whether preplay communication and reputational information aid in solving collective actions problems by using laboratory experimental methods to disentangle the separate effects of both signals and past behavioral information. The results are discouraging. Increased information about the past behavior of subjects, coupled with preplay signaling, decreases levels of contributions to the public good. These results point to how quickly group distrust takes root and the consequences of that distrust.