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The value of lies in a power-to-take game with imperfect information

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Author Info

  • Besancenot, Damien

    ()
    (University of Paris 13 and CEPN)

  • Dubart, Delphine

    ()
    (ESSEC Business School)

  • Vranceanu, Radu

    ()
    (ESSEC Business School)

Abstract

Humans can lie strategically in order to leverage on their negotiation power. For instance, governments can claim that a "scapegoat" third party is responsible for reforms that impose higher costs on citizens, in order to make the pill sweeter. This paper analyzes such communication strategy within a variant of the ultimatum game. The first player gets an endowment, and the second player can impose a tax on it. The former can reject the allocation submitted by the tax-setter. A third party is then allowed to levy its own tax, and its intake is private information to the tax-setter. In a frameless experiment, 65% of the subjects in the tax-setter role overstate the tax levied by the third party in order to manipulate taxpayer’s expectations and submit less advantageous offers; on average, for every additional currency unit of lie, measured by the gap between the claimed and the actual tax, they would reduce their offer by 0.43 currency units.

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Bibliographic Info

Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number WP1205.

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Length: 23 pages
Date of creation: 16 Mar 2012
Date of revision:
Handle: RePEc:ebg:essewp:dr-12005

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Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
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Web page: http://www.essec.edu/
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Keywords: Ultimatum game; Taxation; Lies; Deception; Asymmetric information;

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  1. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
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  12. Croson, Rachel T. A., 1996. "Information in ultimatum games: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 30(2), pages 197-212, August.
  13. Li Hao & Daniel Houser, 2011. "Honest Lies," Working Papers 1021, George Mason University, Interdisciplinary Center for Economic Science.
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Cited by:
  1. Besancenot, Damien & Dubart, Delphine & Vranceanu, Radu, 2012. "The value of lies in an ultimatum game with imperfect information," ESSEC Working Papers WP1207, ESSEC Research Center, ESSEC Business School.

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