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Do Liars Believe? Beliefs and Other-Regarding Preferences in Sender-Receiver Games

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  • Roman M. Sheremeta

    (Argyros School of Business and Economics, Chapman University)

  • Timothy Shields

    ()
    (Argyros School of Business and Economics, Chapman University)

Abstract

We examine subjects' behavior in sender-receiver games where there are gains from trade and alignment of interests in one of the two states. We elicit subjects' beliefs, risk and other-regarding preferences. Our design also allows us to examine the behavior of subjects in both roles, to determine whether the behavior in one role is the best response to the subject's own behavior in the other role. The results of the experiment indicate that 60 percent of senders adopt deceptive strategies by sending favorable message when the true state of the nature is unfavorable. Nevertheless, 67 percent of receivers invest conditional upon a favorable message. The investing behavior of receivers cannot be explained by risk preferences or as a best response to subject's own behavior in the sender's role. However, it can be rationalized by accounting for elicited beliefs and other-regarding preferences. Finally, the honest behavior of some senders can be explained by other-regarding preferences. Thus we find liars do believe, and individuals who care about the payoffs of others tend to be honest.

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Bibliographic Info

Paper provided by Chapman University, Economic Science Institute in its series Working Papers with number 12-05.

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Length: 30 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:chu:wpaper:12-05

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Keywords: experiment; strategic communication; beliefs; lying; deception; other-regarding preferences;

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Citations

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Cited by:
  1. Curtis R. Price & Roman M. Sheremeta, 2012. "Endowment Origin, Demographic Effects and Individual Preferences in Contests," Working Papers, Chapman University, Economic Science Institute 12-07, Chapman University, Economic Science Institute.
  2. Irlenbusch, Bernd & Ter Meer, Janna, 2013. "Fooling the Nice Guys: Explaining receiver credulity in a public good game with lying and punishment," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 93(C), pages 321-327.
  3. Bernd Irlenbusch & Janna Ter Meer, 2012. "Fooling the Nice Guys: The effect of lying about contributions on public good provision and punishment," Cologne Graduate School Working Paper Series, Cologne Graduate School in Management, Economics and Social Sciences 03-11, Cologne Graduate School in Management, Economics and Social Sciences.

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