A difficulty with oaths: On trust, trustworthiness, and signalling
AbstractIn the wake of the Enron and Worldcom financial scandals that rocked Wall Street in 2002, the US governmentâs financial regulatory body, the Security and Exchange Commission (SEC) took the unprecedented step in June 2002 of requiring that the chief executives and chief financial officers of Americaâs 947 biggest companies to swear on oath that their company results and financial reports were to the best of their knowledge accurate. The one-off order was quickly followed by the passing of the Sarbanes-Oxely act, which will require many more CEOs and CFOs to certify their company reports and financial statements at regular intervals. In this paper we apply a simple signalling model to examine whether or not this type of institutional signal of trustworthiness is always efficient. We find that in the presence of signalling costs, the separating equilibrium can be socially inefficient as well as causing a general loss of trust.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Springer in its journal European Journal of Law and Economics.
Volume (Year): 22 (2006)
Issue (Month): 3 (November)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100264
Asymmetric information; Institutional signals; Oaths; Risk; Trust;
Other versions of this item:
- Friedel Bolle & Matthew Braham, . "A Difficulty with Oaths: On Trust, Trustworthiness, and Signalling," German Working Papers in Law and Economics 2003-1-1055, Berkeley Electronic Press.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carmichael, H Lorne & MacLeod, W Bentley, 1997.
"Gift Giving and the Evolution of Cooperation,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 485-509, August.
- David M Kreps & Robert Wilson, 2003.
Levine's Working Paper Archive
618897000000000813, David K. Levine.
- Chatterjee, Kalyan & Samuelson, Larry, 1990.
"Perfect Equilibria in Simultaneous-Offers Bargaining,"
International Journal of Game Theory,
Springer, vol. 19(3), pages 237-67.
- Chatterjee, K. & Samuelson, L., 1989. "Perfect Equilibria In Simultaneous- Offers Bargaining," Papers 12-87-3, Pennsylvania State - Department of Economics.
- Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
- Coleman, James S, 1991. "Constructed Organization: First Principles," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 7-23, Special I.
- Friedel Bolle, 2001. "Why to Buy Your Darling Flowers: On Cooperation and Exploitation," Theory and Decision, Springer, vol. 50(1), pages 1-28, February.
- Winand Emons, 2001.
"Perjury versus Truth-Revelation: Quantity or Quality of Testimony,"
dp0103, Universitaet Bern, Departement Volkswirtschaft.
- Winand Emons, 2005. "Perjury versus Truth Revelation: Quantity or Quality of Testimony," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(3), pages 392-, September.
- Basu, Kaushik, 1989. "A Theory of Association: Social Status, Prices and Markets," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 653-71, October.
- Akerlof, George A, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 599-617, November.
- Coleman, James S, 1984. "Introducing Social Structure into Economic Analysis," American Economic Review, American Economic Association, vol. 74(2), pages 84-88, May.
- Thaize Challier, M.-Christine, 2010. "Socio-political conflict, social distance, and rent extraction in historical perspective," European Journal of Political Economy, Elsevier, vol. 26(1), pages 51-67, March.
- repec:hal:cesptp:halshs-00731244 is not listed on IDEAS
- Nicolas Jacquemet & Robert-Vincent Joule & Stephane Luchini & Jason Shogren, 2013.
"Preference Elicitation under Oath,"
PSE - Labex "OSE-Ouvrir la Science Economique"
- Nicolas Jacquemet & Robert-Vincent Joule & Stéphane Luchini & Jason F. Shogren, 2009. "Preference Elicitation under Oath," Documents de travail du Centre d'Economie de la Sorbonne 09043, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- repec:hal:cesptp:halshs-00396721 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.