The Hidden Value of Lying: Evasion of Guilt in Expert Advice
AbstractI 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 InfoPaper provided by Job Market Papers in its series 2013 Papers with number pkh266.
Date of creation: 20 Nov 2013
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Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-29 (All new papers)
- NEP-CTA-2013-11-29 (Contract Theory & Applications)
- NEP-MIC-2013-11-29 (Microeconomics)
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