The value of lies in a power-to-take game with imperfect information
AbstractHumans 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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Date of creation: 16 Mar 2012
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Ultimatum game ; Taxation ; Lies ; Deception ; Asymmetric information;
Other versions of this item:
- Besancenot, Damien & Dubart, Delphine & Vranceanu, Radu, 2012. "The value of lies in a power-to-take game with imperfect information," ESSEC Working Papers WP1205, ESSEC Research Center, ESSEC Business School.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-02 (All new papers)
- NEP-CTA-2012-05-02 (Contract Theory & Applications)
- NEP-EXP-2012-05-02 (Experimental Economics)
- NEP-GTH-2012-05-02 (Game Theory)
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