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The value of lies in an ultimatum game with imperfect information

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  • Damien Besancenot

    ()
    (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris XIII - Paris Nord - CNRS : UMR7234)

  • Delphine Dubart

    (ESSEC Business School - ESSEC Business School)

  • Radu Vranceanu

    ()
    (Economics Department - 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 HAL in its series Post-Print with number hal-00692139.

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Date of creation: 16 Apr 2012
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Handle: RePEc:hal:journl:hal-00692139

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Related research

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

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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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