Truth, Trust, and Sanctions: On Institutional Selection in Sender–Receiver Games
AbstractThis paper reports on a laboratory experiment which investigates the impact of institutions and institutional choice in constant-sum sender-receiver games. We compare individual sender and receiver behavior in two different institutions: A sanction-free institution which is given by the bare sender-receiver game and a sanctioning institution which in addition offers the receiver the opportunity to (costly) sanction the sender after receiving feedback on the senders private information. We conduct the experiment in two phases: First, individuals are randomly assigned to an institution, and second they can choose the institution themselves.We find that sanctioning takes place predominantly after the receiver has trusted a lie by the sender. Those who are responsible for sanctioning are also responsible for truth-telling in excess with respect to models of rational payoff-maximizing agents.Thereby, the sanctioning institution exhibits more truth-telling. Most importantly, agents who sanction reveal preference for the sanctioning institution while the other subjects almost exclusively opt for the sanction-free institution. As a consequence, both institutions typically coexist in the second phase of the experiment and the sanctioning institution exhibits a higher level of truth-telling and lower aggregate material payoffs.To offer an explanation of our experimental findings, we formalize preferences for truth-telling as psychological payoffs and analyze the sender-receiver game as a dynamic psychological game Ã la Battigalli and Dufwenberg (2006). We demonstrate that standard models of social preferences are not able to explain observed sanctioning behavior and excessive truth-telling. Explicit psychological costs of lying and the exposition to a lie, however, are able to fill this gap. To this end, we model deontological and consequentialistic preferences for truth-telling and evaluate their respective explanatory power.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 115 (2013)
Issue (Month): 2 (04)
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
Other versions of this item:
- Ronald Peeters & Marc Vorsatz & Markus Walzl, 2011. "Truth, trust, and sanctions: On institutional selection in sender-receiver games," Working Papers 2011-28, Faculty of Economics and Statistics, University of Innsbruck.
- Peeters, Ronald & Vorsatz, Marc & Walzl, Markus, 2007. "Truth, trust, and sanctions: On institutional selection in sender-receiver games," Research Memorandum 034, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
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