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Who cares when Value (Mis)reporting may be found out? An Acquiring-a-Company experiment with value messages and information leaks

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  • Di Cagno, Daniela
  • Güth, Werner
  • Lohse, Tim
  • Marazzi, Francesca
  • Spadoni, Lorenzo

Abstract

We modify the Acquiring-a-Company game to study how information leaks affect lying and market outcomes in an ultimatum bargaining setting with asymmetric information. Privately informed sellers send messages about the alleged value of their company to potential buyers. Via random leaks buyers, however, can learn the true value before proposing a price which the seller finally accepts or not. Only 14.5% of the messages are truthful, whereas two-thirds of all sellers exaggerate the company’s value to persuade buyers to offer more, especially when the true value is small. Although a higher leak probability does not reduce the frequency of misreporting, it weakens overreporting and strengthens underreporting. Buyers who found out value misreporting anchor their price proposals on the true value but do not explicitly discriminate against liars. Sellers are mainly opportunistic and make their acceptances dependent on the resulting positive payoff. Even if ethical concerns do not seem to matter much, probabilistic leaks are welfare enhancing.

Suggested Citation

  • Di Cagno, Daniela & Güth, Werner & Lohse, Tim & Marazzi, Francesca & Spadoni, Lorenzo, 2024. "Who cares when Value (Mis)reporting may be found out? An Acquiring-a-Company experiment with value messages and information leaks," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 108(C).
    • Handle: RePEc:eee:soceco:v:108:y:2024:i:c:s2214804323001775
    DOI: 10.1016/j.socec.2023.102151
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    More about this item

    Keywords

    Acquiring-a-company experiments; Information leaks; Cheap talk; (Not) lying; Ultimatum bargaining;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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