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The Hidden Value of Lying: Evasion of Guilt in Expert Advice

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  • Kiryl Khalmetski

Abstract

I develop a model of strategic communication between an uninformed receiver and a partially informed sender who is averse to lying. The sender's cost of lying is endogenous, depending on the receiver's beliefs induced by the sender's message, rather than on its exogenous formulation. One of my main findings is that this leads to the endogenous emergence of evasive communication, i.e., pretending to be uninformed, even when communication is completely unrestricted. Furthermore, the belief-dependent cost of lying gives rise to specific predictions regarding the welfare implications of several conventional policies. In particular, prohibition of lying (i.e., of explicit falsification) may lead to a decrease in the receiver's welfare. In addition, dealing with an ex-ante less informed sender can be beneficial to the receiver. The results are attributed exclusively to belief-dependent preferences and cannot be explained by an outcome-based model.

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Bibliographic Info

Paper provided by Job Market Papers in its series 2013 Papers with number pkh266.

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Date of creation: 20 Nov 2013
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Handle: RePEc:jmp:jm2013:pkh266

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  1. Guerra, Gerardo & John Zizzo, Daniel, 2004. "Trust responsiveness and beliefs," Journal of Economic Behavior & Organization, Elsevier, vol. 55(1), pages 25-30, September.
  2. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  3. Gruber, Jon & Kim, John & Mayzlin, Dina, 1999. "Physician fees and procedure intensity: the case of cesarean delivery," Journal of Health Economics, Elsevier, vol. 18(4), pages 473-490, August.
  4. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  5. Navin Kartik, 2009. "Strategic Communication with Lying Costs," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1359-1395.
  6. Christoph Vanberg, 2008. "Why Do People Keep Their Promises? An Experimental Test of Two Explanations -super-1," Econometrica, Econometric Society, vol. 76(6), pages 1467-1480, November.
  7. Kiryl Khalmetski & Axel Ockenfels & Peter Werner, 2013. "Surprising Gifts - Theory and Laboratory Evidence," Working Paper Series in Economics 61, University of Cologne, Department of Economics.
  8. Kartik, Navin & Ottaviani, Marco & Squintani, Francesco, 2007. "Credulity, lies, and costly talk," Journal of Economic Theory, Elsevier, vol. 134(1), pages 93-116, May.
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