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The value of lies in an ultimatum game with imperfect information

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  • Besancenot, Damien

    ()
    (CEPN)

  • Dubart, Delphine

    ()
    (ESSEC Business School)

  • Vranceanu, Radu

    ()
    (ESSEC Business School)

Abstract

Humans often lie strategically. We study this problem in an ultimatum game involving informed proposers and uninformed responders, where the former can send an unverifiable statement about their endowment. If there are some intrinsically honest proposers, a simple message game shows that the rest of them are likely to declare a lower-than-actual endowment to the responders. In the second part of the paper, we report on an experiment testing this game. On average, 88.5% of the proposers understate the actual endowment by 20.5%. Regression analysis shows that a one-dollar gap between the actual and declared amounts prompts proposers to reduce their offer by 19 cents. However, responders appear not to take such claims seriously, and thus the frequency of rejections should increase. The consequence is a net welfare loss, that is specific to such a "free-to-lie" environment.

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Bibliographic Info

Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number WP1207.

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Length: 31 pages
Date of creation: 16 Apr 2012
Date of revision:
Handle: RePEc:ebg:essewp:dr-12007

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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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Related research

Keywords: Ultimatum game; Asymmetric information; Lying costs; Strategic lies; Deception; Welfare loss;

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References

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Cited by:
  1. 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, vol. 93(C), pages 321-327.
  2. Kriss, Peter H. & Nagel, Rosemarie & Weber, Roberto A., 2013. "Implicit vs. explicit deception in ultimatum games with incomplete information," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 337-346.

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