The value of lies in an ultimatum game with imperfect information
AbstractHumans 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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Date of creation: 16 Apr 2012
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Ultimatum game; Asymmetric information; Lying costs; Strategic lies; Deception; Welfare loss;
Other versions of this item:
- Besancenot, Damien & Dubart, Delphine & Vranceanu, Radu, 2013. "The value of lies in an ultimatum game with imperfect information," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 239-247.
- 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.
- 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-2012-05-15 (All new papers)
- NEP-CBE-2012-05-15 (Cognitive & Behavioural Economics)
- NEP-CTA-2012-05-15 (Contract Theory & Applications)
- NEP-EXP-2012-05-15 (Experimental Economics)
- NEP-GTH-2012-05-15 (Game Theory)
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